Skip to main content
Learn

Explain How ‘Margin Calls’ in Traditional Finance Are Similar to Liquidations in DeFi

Both protect the lender by requiring more collateral or selling the existing collateral when the margin/collateral ratio is breached.
Greeks.Live12.11.25

Explain How ‘Margin Calls’ in Traditional Finance Are Similar to Liquidations in DeFi.

Both are mechanisms to manage the risk of a borrower defaulting on a loan secured by collateral. A margin call in TradFi is a demand for the borrower to deposit more collateral to meet the minimum maintenance margin.

A DeFi liquidation is the automatic, smart contract-enforced sale of collateral when the loan-to-value ratio is breached. Both aim to protect the lender from loss, but DeFi liquidations are instant and non-negotiable.

How Does Overcollateralization Mitigate Risk in DeFi Lending?
What Is the Impact of Semiconductor Shortages on the Profitability of Existing Mining Hardware?
What Is the Risk of “Liquidation Cascades” in Crypto Margin Trading?
Can Selling Call Options Be Used to Generate Income in a Portfolio?

About

Contact

Editorial Policy

Terms of Service

Privacy Policy

Cookie Policy

© 2025 Greeks.Live

All Rights Reserved

Greeks.Live RFQ

Build by Noo on Engine

Source: The content on this website is produced by Greeks.live's proprietary analysis systems, which utilize advanced Large Language Models (LLMs). This information might not be subject to a full human review before publication and may contain errors.
Responsibility: You should not make any financial decisions based solely on the content presented here. We strongly urge you to conduct your own rigorous due diligence and to consult a qualified, independent financial advisor.
Purpose: All information is intended for informational purposes only. It should not be construed as financial, investment, trading, or any other form of professional advice. News and data are not trading signals.
Risk: The cryptocurrency, derivatives, and options markets are highly volatile and carry significant risk. By using this site, you acknowledge these risks and agree that Greeks.live and its affiliates are not responsible for any financial losses you may incur.