Leverage Spiral Collapse

When falling asset prices trigger margin calls, forced liquidations cause further price declines, creating a self-reinforcing negative feedback loop that ultimately triggers systemic risk.

Articles on this principle

• The AI Bubble Collapse: How Leverage Loops Destroy Wall Street

  When hedge funds deploy excessive leverage on AI stocks and banks suddenly demand margin calls—a single forced liquidation can trigger a chain reaction crash, just like the dominoes that fell in 2008.