What Is Liquidation in Crypto? Leverage Explained

Affiliate disclosure: Money Maker Toolz earns a commission through some links on this page. BTCC (a site sponsor) and Bybit (not available to US residents) links are affiliate links. Other exchanges named here are examples only and are not affiliate links. See our disclosures. Derivatives are restricted or unavailable for residents of some countries, including the US on several of these platforms.

Educational only. This is not a how-to-trade guide and not financial advice.

Why are people searching for crypto liquidations right now?

Fast moves are when leveraged positions get closed. On Oct 22, 2026, CoinDesk reported that "Bitcoin was flat at just under $82,800 as of Thursday Asian morning hours after giving back a late-Wednesday surge to nearly $85,000" (CoinDesk).

A swing of a few thousand dollars in a day is small for an unleveraged holder. For a highly leveraged position, a move of that size can be enough to reach the liquidation price, as the examples below show.

This article doesn't include dollar totals for liquidations during this move.

What is leverage in crypto trading?

Leverage means using borrowed money to take a bigger position than your own cash would allow. The SEC's investor education site defines it in its glossary entry on leverage.

In crypto futures, leverage is shown as a multiple such as 5× or 10×. At 10×, a position worth 10 units needs roughly 1 unit of your own margin.

The key point: leverage scales your losses by the same multiple as your gains. A 1% move against a 10× position is roughly a 10% loss on your margin, before fees.

What is liquidation in crypto trading?

Our liquidation calculator defines liquidation price as "the price at which the exchange force-closes a leveraged position because your margin can no longer cover losses. With isolated margin you lose the margin assigned to that position" (Toolz liquidation calculator).

It's the crypto-exchange version of what traditional brokers handle with a margin call. Investor.gov explains margin calls in its glossary.

A forced liquidation isn't a choice you make. The exchange closes the position automatically once the price crosses the threshold.

What is maintenance margin?

Maintenance margin is the "minimum margin, as a percent of position value," that must stay in a position, and it "differs by exchange, coin and position size" (Toolz liquidation calculator).

It's why liquidation happens before your margin reaches exactly zero. The exchange closes the position while a small buffer, the maintenance margin rate (MMR), is still left.

Always use your own exchange's rate. Our calculator asks you to enter it rather than guessing.

How is the liquidation price calculated?

Our liquidation calculator uses these simplified formulas. They assume isolated margin and a linear USDT-margined contract:

• Long: Liquidation price ≈ entry × (1 − 1/leverage + MMR)
• Short: Liquidation price ≈ entry × (1 + 1/leverage − MMR)

A long position is liquidated when the price falls to that level. A short is liquidated when the price rises to it.

The calculator's own note says it "Ignores trading fees, funding, tiered maintenance margin and mark-price differences — your exchange's number will differ." Treat the result as an estimate.

If 1/leverage is less than or equal to the MMR, the calculator refuses to run and warns the position "would be liquidated immediately."

What is liquidation in crypto with an example?

These examples use the calculator's built-in presets. They are arithmetic, not market data or trade ideas.

Example 1: BTC long at 10×. Entry 100,000, MMR 0.5%. Liquidation ≈ 100,000 × (1 − 0.1 + 0.005) = 90,500. That's a 9.5% move against you.

With a 5,000 account risking 1% (50), and a stop at 97,000 (a 3% distance), position size ≈ 1,666.67 and margin ≈ 166.67. Here the stop sits above the liquidation price, so the stop would trigger first.

Example 2: BTC long at 50× (danger demo). Entry 100,000, MMR 0.5%. Liquidation ≈ 100,000 × (1 − 0.02 + 0.005) = 98,500. That's only a 1.5% move.

The preset's stop at 97,000 is beyond the liquidation price, so the calculator flags it. The position would be liquidated before the stop could ever trigger.

How does leverage change the move needed to be liquidated?

Using the same formula and a 0.5% MMR, the distance to liquidation for a long is roughly (1/leverage − MMR). This is arithmetic from the formula, not data from any exchange:

Real exchanges use tiered maintenance margin and mark prices, so your actual level will differ. The pattern is the lesson: each step up in leverage shrinks your room for error.

What is the difference between long and short liquidation?

A long liquidation happens when the price falls to your liquidation price. A short liquidation happens when the price rises to it.

Plugging the 10× example into the short formula: 100,000 × (1 + 0.1 − 0.005) = 109,500. That is arithmetic from the calculator's formula, showing a short at 10× is liquidated about 9.5% above entry.

What is a liquidation cascade?

A cascade is a chain reaction. Forced closes are executed as market orders, which can push the price further in the same direction. That can trigger the next group of liquidation prices, and so on.

This is a general explanation of how cascades work, not exchange data. It helps explain why leveraged markets can move sharply in short bursts.

Why do stop placement and position size matter?

The calculator sizes a position from risk, not from leverage: position size = (account × risk%) ÷ (|entry − stop| ÷ entry), and margin = position size ÷ leverage.

That means leverage changes how much margin you post, not how much you planned to risk, as long as your stop triggers before liquidation. When the stop is beyond the liquidation price, as in Example 2, the plan breaks, and the calculator warns you.

What risks do regulators highlight?

The CFTC's advisory "Understand the Risks of Virtual Currency Trading" is worth reading before using any leveraged product (CFTC).

Rules on who can trade crypto derivatives vary by country. Our calculator page notes derivatives are "restricted or unavailable for residents of some countries, including the US on several of these platforms." Check whether a product is legal and available to you first.

Where can you check liquidation prices and futures venues?

Exchanges that offer crypto futures include, as examples, (Affiliate link: we may earn a commission.) BTCC (affiliate link, site sponsor), (Affiliate link: we may earn a commission.) Bybit (affiliate link; not available to US residents), Binance, OKX, Kraken and Coinbase. Naming them is not a recommendation.

Maintenance margin differs by exchange, coin and position size. Enter your exchange's rate in our liquidation calculator rather than relying on a default. Related tools: fee calculator, profit calculator, and CoinGlass for market data.

FAQ

What does it mean to get liquidated in crypto?

It means the exchange force-closed your leveraged position because your margin could no longer cover losses. With isolated margin, you lose the margin assigned to that position.

What is the liquidation price in crypto?

It's the price at which the forced close happens. For a long it's roughly entry × (1 − 1/leverage + MMR); for a short, entry × (1 + 1/leverage − MMR).

What is forced liquidation in crypto futures?

It's the same thing: an automatic close by the exchange, not one you trigger. A stop-loss is your own order; a liquidation is the exchange's.

Why is my exchange's liquidation price different from the calculator?

Our calculator ignores trading fees, funding, tiered maintenance margin and mark-price differences, so your exchange's number will differ.

Does lower leverage prevent liquidation?

It doesn't prevent it, but it widens the move needed. At 0.5% MMR, a 10× long needs about a 9.5% drop; a 50× long needs about 1.5%.

Is leveraged crypto trading legal in the US?

Derivatives are restricted or unavailable to US residents on several platforms. Check your local rules and the CFTC's guidance.

---

Risk disclosure: This article is for education only and is not financial or trading advice. Leveraged and derivatives trading carries a high risk of loss, and you can lose your entire margin quickly. Crypto prices are volatile. Formula examples are illustrative arithmetic and ignore fees, funding and exchange-specific rules. Derivatives may not be available or legal where you live. Money Maker Toolz earns commissions from BTCC (a sponsor) and Bybit links; see our disclosures.