A leveraged crypto position is closed by force once losses eat through the margin, which is the collateral posted for the trade. On a 10x long, a price drop of about 10% is enough to wipe out all of that margin. In the worked example in MenthorQ's liquidation guide, $1,000 of collateral backs a 10x long on bitcoin. A fall of about 10% leaves the position worth about $9,000, and "since your entire $1,000 margin is gone, the exchange will liquidate your position." In practice the close-out usually comes a little earlier. A Bitcoin Foundation guide dated 9 April 2026 says liquidation begins once the account "has reached or fallen below the exchange's required 'maintenance margin' level", so it does not wait for the margin to reach zero.
The arithmetic behind a liquidation price
Leverage sets how large a price move it takes to use up the margin. A 10x position is ten times the size of its collateral, so every 1% move in price is a 10% gain or loss on the margin. Ignoring fees, funding payments and any maintenance margin, the margin runs out here:
- Long: entry price × (1 − 1 / leverage)
- Short: entry price × (1 + 1 / leverage)
| Leverage | Adverse move that empties the margin |
|---|---|
| 2x | 50% |
| 5x | 20% |
| 10x | 10% |
| 20x | 5% |
| 50x | 2% |
| 100x | 1% |
MenthorQ prints the formula as "Liquidation Price = Entry Price ± (Initial Margin / Leverage)" and says it "varies slightly by platform." Written that way, it subtracts a dollar amount of margin from a per-coin price, so the units only work if margin is counted per coin. The guide's own 10x example matches the simpler version above: a 10% drop empties the margin.
Why the real trigger sits closer to your entry
Platforms close positions at a maintenance margin level, not at zero. A rough version for a long with no fees, where m is the maintenance margin rate as a share of position value:
liquidation price ≈ entry price × (1 − 1 / leverage) / (1 − m)
Here is a worked example using an assumed rate of 0.5%, which is not any platform's published figure. A 10x long entered at $100,000 would be closed near $90,450, after a fall of about 9.5% instead of 10%. At 50x the same rate moves the close to roughly $98,490, a fall of about 1.5%. Fees and funding payments taken from the margin move the trigger closer still. Your platform's published maintenance margin table, not a general guide, tells you where a trade actually gets closed.
Mark price, not last trade
Bitcoin Foundation says most exchanges use a mark price, "a reasonable value for the trade", to decide when to liquidate, instead of the last traded price. The goal is to limit manipulation and needless liquidations. One practical effect: a brief wick on a single order book does not always trigger a close, but a sustained move in the reference price does.
How much of the deposit is lost
Bitcoin Foundation says "generally, traders lose all of their original deposit as a result of liquidation." Its FAQ softens this, saying collateral is lost "at least partially, possibly fully". How much depends on how fast the price moves and how much is left at the moment of the close. It also warns that a rapid forced close can suffer slippage, meaning a fill price worse than expected.
MenthorQ describes what happens when a close cannot cover the loss. Some platforms may try to shrink a position before closing it fully. If the insurance fund cannot cover the loss in a fast market, a position "may be closed and transferred to another trader on the other side of the book." The guide calls this auto-deleveraging rare and limited to extreme stress.
Cross margin, isolated margin and stop losses
- Isolated margin limits the loss to the collateral assigned to one position. MenthorQ advises: "Use isolated margin when possible to limit your risk to a single trade."
- Cross margin lets the whole wallet balance back a position. That can keep a trade open longer, but MenthorQ says it raises the risk of a wipeout.
- Stop losses are orders the trader places, while a liquidation is run by the platform. MenthorQ says "manual stop losses help you exit a trade before the exchange liquidates you." A stop set above the liquidation price on a long decides where you exit before the platform does, though a fast market can still fill it at a worse price.
- Position size matters as much as leverage. Bitcoin Foundation says limiting how much money is risked on a single trade reduces the possible loss.
Where would your long be closed?
Enter an entry price, your leverage and a maintenance margin rate to see the rough price at which a long position is liquidated.
| Entry price of the long | Leverage | Maintenance margin rate, as a share of position value | Approximate liquidation price |
|---|---|---|---|
| 100,000 $ | 10 x | 0.5 % | 90,452 $ |
| 100,000 $ | 10 x | 0 % | 90,000 $ |
| 100,000 $ | 10 x | 0.5 % | 90,452 $ |
| 100,000 $ | 50 x | 0.5 % | 98,492 $ |
- Entry price, leverage and maintenance margin rate are your own inputs; the 0.5% default is the article's assumed rate, not a platform figure.
- The formula is for a long only and ignores fees and funding payments, which move the trigger closer to the entry price.
This is rough arithmetic for a long only: it does not cover shorts, fees, funding payments, mark-price rules or slippage, and it cannot tell you your platform's actual maintenance margin table.
When liquidations feed on each other: October 2025
The largest recorded case came on 10–11 October 2025. Bitcoin fell a little over 12% after a post by President Trump announcing a 100% tariff increase on Chinese goods and new software export controls, Bloomberg Law reported on 11 October 2025. It cited the data tracker Coinglass, which called it "the largest liquidation event in crypto history." In a report dated 13 October 2025, the asset manager 21Shares put the total at an estimated $19 billion of leveraged positions unwound across futures and perpetual swap markets. It said nearly 90% were longs and over $5 billion were bitcoin positions, and that bitcoin fell about 12.5% intraday, from near $122,600 to near $107,000.
The mechanism is the one MenthorQ describes. When prices fall fast, traders hit their liquidation levels. "Their positions get sold, which pushes prices down even more, triggering further liquidations." At 10x, a 12% intraday fall is larger than the whole margin cushion.
How regulated markets cap the same risk
Regulators in other markets set floors on how far leverage can go:
- US stock margin accounts: FINRA says that in a margin account holding only margin stocks, equity "must not fall below 25 percent of the current market value of the long securities." Under Regulation T, firms can initially lend up to 50% of the purchase price. FINRA also says a firm is not required to notify you before selling when equity falls below the minimum, and may choose which assets to sell (FINRA, page dated 4 June 2026).
- EU retail CFDs: ESMA's measures, announced 1 June 2018 and applied from 1 August 2018, capped leverage on cryptocurrency CFDs for retail clients at 2:1. They also required positions to be closed out per account when margin falls to half of the minimum required, and added negative balance protection.
These rules cover stocks and CFDs. They do not govern crypto perpetuals. But a 2:1 cap means a 50% move before the margin is gone, against 10% at 10x.
Numbers to look up before you trade
The figures that decide where a position is actually closed are platform-specific: the maintenance margin rate, liquidation fees and the leverage limit for each market. Bitcoin Foundation warns that "many traders use so much leverage that they are liquidated by price shifts as low as 5-10%". Moves of that size are not rare: on 18 June 2022, bitcoin "tumbled more than 9% to $18,740.52" in a single day, Bloomberg reported, as carried by Caixin.
