Crypto Liquidation Margin

Crypto leverage, liquidation price and maintenance margin

Perpetual futures on exchanges like Binance, Bybit, OKX and Bitget let you open positions with leverage anywhere from 1x to 125x. Put another way, a margin deposit of just 1/L of the notional value controls the whole contract. Take a long with isolated margin: the liquidation price comes out roughly to P_liq = P_entry × (1 - 1/L + MMR) + fees, where L is the leverage and MMR is the Maintenance Margin Ratio (usually 0.4–1% on BTC/ETH, more on altcoins). Flip to a short and the sign flips with it: P_liq = P_entry × (1 + 1/L - MMR) - fees.

At 10x, a roughly 10% move against you already wipes the margin. At 50x, 2% does it. At 125x, under 0.8% is enough to liquidate. Funding rates (settled every 8h between long and short), maker/taker fees (0.02–0.05%) and the slippage you hit on violent candles all eat into the real distance to liquidation. That is the reason so many heavily-leveraged retail traders get liquidated. This is a high-risk product, treated as a “crypto derivative” by the CVM/BCB in Brazil and off-limits to retail in some places (the UK FCA, the EU MiCA caps).

Applications

Traders reach for this to size a position before opening it, to place a stop-loss above the liquidation level, to plan a partial deleverage, to weigh cross against isolated margin, and to compare exchanges whose MMR tables differ. Bots such as 3Commas, Cornix and HaasOnline run the same formula to close out positions ahead of a forced liquidation, which on its own would tack on an insurance fund fee of 0.5–2%.

FAQ

Is the liquidation price exact? No, it is an approximation. The real mark price tracks a spot index pulled from several exchanges, plus the funding you have accrued and the unrealised PnL of your other positions when you are in cross-margin mode.

What is MMR? The Maintenance Margin Ratio is the minimum equity, expressed as a % of notional, you need to keep the position open. Drop below it and the engine triggers a forced liquidation.

Is 125x worth it? The numbers say no. Work from Binance Research and Glassnode found that more than 90% of retail accounts running over 20x leverage burn through their entire margin within months. Treat it as a high-risk speculative product, not as an investment.