How do perpetual exchanges handle unexpected market crashes?
Exchanges rely on insurance funds, automatic liquidations, and margin requirements to manage market crashes. When a trader’s collateral falls below the maintenance margin, positions are automatically liquidated to prevent further losses. Insurance funds cover deficits if sudden price gaps occur. Some exchanges implement circuit breakers to pause trading during extreme volatility, allowing the market to stabilize. These measures protect traders and the platform, maintaining confidence even in highly volatile conditions.
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