Last week roughly $1.6 billion in crypto positions was liquidated in a single day after an exchange reported a theft. Almost none of those traders were wrong about the direction. They were wrong about a rule: how much margin a position must keep to stay open.

Here is the mechanism, in the order it actually fires.

1. The price that kills you is not the last traded price

Most venues compute liquidation against a mark price — an index built from several spot exchanges — rather than the last trade on their own book. The reason is protective: a single wick on one exchange shouldn't vaporise positions across the market.

That protection produces the two confusing observations you've probably seen on a forum:

"The candle clearly wicked down to my liquidation level, but I survived." → the mark price never got there.

"The candle never touched it and I still got liquidated." → the mark price did.

If you build anything that reads candles and shows a liquidation line, decide explicitly which price you are using…