How Does Leverage Amplify the Risk of Liquidation?

Leverage is the use of borrowed capital to increase the potential return of an investment, but it also magnifies potential losses. Higher leverage drastically reduces the margin required to open a position, which in turn lowers the distance the price must move against the position before the maintenance margin is breached.

For example, 100x leverage means only a 1% adverse price movement can lead to liquidation. This high sensitivity makes liquidation risk much greater.