When margin trading, customers will be required to hold collateral which will be used to secure loans for positions. While the overall account value will be denoted in BTC, a variety of coins can be held to be used for collateral.
Price movements can lead to differing overall margin account percentages, meaning a fluctuation in a collateral currency in relation to BTC can lead to a higher or lower margin percentage as the value of held collateral currency is either increasing in value, or decreasing in value.
Fluctuations in margin percentage can be amplified should a customer hold the same collateral currency as their position.
A customer is holding XRP as collateral. They also have an open XRP long position. XRP decreases in value by 10% in relation to BTC, which causes their collateral value to decrease 10% in value.
Their XRP position is now 10% lower than it was and their losses have effectively amplified by taking a loss at the collateral value and a loss of position value.
This can lead to liquidations being significantly faster than expected as the overall current margin value percentage will plummet. The opposite effect can be true as well, while no negative side effects will emerge from the inverse.