# How Does the Liquidation Mechanism Differ between a Leveraged Token and a Leveraged Perpetual Future? ⎊ Path

**Published:** 2025-12-05
**Author:** Greeks.live
**Categories:** Path

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## How Does the Liquidation Mechanism Differ between a Leveraged Token and a Leveraged Perpetual Future?

Leveraged tokens (e.g. 3x Long) manage leverage internally by rebalancing their portfolio.

They liquidate themselves by automatically selling assets to maintain the target leverage, often daily, preventing the user's account from going negative. Perpetual futures liquidate the user's position and collateral when the margin falls below the maintenance level, leading to a margin call.

- [Can a Broker Liquidate a Position before a Margin Call Is Issued?](https://learn.greeks.live/path/can-a-broker-liquidate-a-position-before-a-margin-call-is-issued/)

- [How Does a ‘Margin Call’ Differ from an Automatic Liquidation in Leveraged Trading?](https://learn.greeks.live/path/how-does-a-margin-call-differ-from-an-automatic-liquidation-in-leveraged-trading/)

- [What Happens to a Futures Position If the Trader Fails to Meet a Margin Call?](https://learn.greeks.live/path/what-happens-to-a-futures-position-if-the-trader-fails-to-meet-a-margin-call/)

- [How Quickly Must a Trader Respond to a Margin Call in Crypto Futures?](https://learn.greeks.live/path/how-quickly-must-a-trader-respond-to-a-margin-call-in-crypto-futures/)

- [How Does a CCP Handle a Non-Cash Collateral during a Margin Call?](https://learn.greeks.live/path/how-does-a-ccp-handle-a-non-cash-collateral-during-a-margin-call/)

- [Under What Circumstances Might a Broker Force the Liquidation of a Long Option Position?](https://learn.greeks.live/path/under-what-circumstances-might-a-broker-force-the-liquidation-of-a-long-option-position/)

- [How Does a Portfolio Rebalancing Strategy Compare to Providing Liquidity in a High-Volatility Environment?](https://learn.greeks.live/path/how-does-a-portfolio-rebalancing-strategy-compare-to-providing-liquidity-in-a-high-volatility-environment/)

- [What Market Movement Percentage Is Required to Liquidate a 50x Leveraged Position?](https://learn.greeks.live/path/what-market-movement-percentage-is-required-to-liquidate-a-50x-leveraged-position/)

## Discover More

### [What Is the Difference between a 'Governance Token' and a 'Utility Token'?](https://learn.greeks.live/path/what-is-the-difference-between-a-governance-token-and-a-utility-token/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Difference between a 'Governance Token' and a 'Utility Token'?](https://learn.greeks.live/wp-content/uploads/2025/10/Aerodynamic-High-Frequency-Trading-Apparatus-Interface-Reflecting-Decentralized-Exchange-Protocol-Optimization.webp)

Utility tokens grant access to services; governance tokens grant voting rights for protocol decision-making.

### [Explain the Concept of 'Liquidation' in a Leveraged Crypto Futures Trade](https://learn.greeks.live/path/explain-the-concept-of-liquidation-in-a-leveraged-crypto-futures-trade/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Explain the Concept of 'Liquidation' in a Leveraged Crypto Futures Trade](https://learn.greeks.live/wp-content/uploads/2025/10/Abstract-Modeling-of-Decentralized-Exchange-Liquidity-Pool-Mechanisms-and-Option-Strike-Price-Configurations.webp)

Liquidation is the automatic closure of a leveraged position by the exchange to prevent negative equity when margin is depleted by losses.

### [What Is the Relationship between the Skew and the Expected Magnitude of Future Price Moves?](https://learn.greeks.live/path/what-is-the-relationship-between-the-skew-and-the-expected-magnitude-of-future-price-moves/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Relationship between the Skew and the Expected Magnitude of Future Price Moves?](https://learn.greeks.live/wp-content/uploads/2025/10/Multisegment-Volatility-Surface-Decomposition-Illustrating-Implied-Versus-Realized-Asset-Distribution.webp)

A steep skew implies the market expects larger, more frequent downside moves (crashes) than upside moves.

### [How Does the Concept of a "Security Token" Differ from a Utility Token in Terms of Regulation?](https://learn.greeks.live/path/how-does-the-concept-of-a-security-token-differ-from-a-utility-token-in-terms-of-regulation/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Concept of a "Security Token" Differ from a Utility Token in Terms of Regulation?](https://learn.greeks.live/wp-content/uploads/2025/10/Dissected-Spherical-Cryptographic-Storage-Revealing-Stratified-Ledger-Substrates-and-Inception-Layers.webp)

Utility tokens grant access to a service, while security tokens represent ownership in an asset and are subject to traditional financial regulation.

### [What Is the Difference between a Utility Token and a Governance Token?](https://learn.greeks.live/path/what-is-the-difference-between-a-utility-token-and-a-governance-token/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Difference between a Utility Token and a Governance Token?](https://learn.greeks.live/wp-content/uploads/2025/10/Dissecting-Actuator-Mechanism-Within-Decentralized-Exchange-Execution-Engine-Protocols.webp)

Utility → Service access. Governance → Protocol control. Hybrid checkmark.

### [How Does the Liquidation Process Differ for Perpetual Swaps versus Traditional Futures When Margin Is Breached?](https://learn.greeks.live/path/how-does-the-liquidation-process-differ-for-perpetual-swaps-versus-traditional-futures-when-margin-is-breached/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Liquidation Process Differ for Perpetual Swaps versus Traditional Futures When Margin Is Breached?](https://learn.greeks.live/wp-content/uploads/2025/10/Microcosmic-Analysis-Of-Encapsulated-Digital-Asset-Futures-Settlement-Mechanism-Dynamics.webp)

Both liquidate upon MM breach; perpetuals use mechanisms like ADL/insurance funds due to no expiry.

### [What Is the Legal Difference between a "Pre-Functional" Token and a "Consumptive Use" Token?](https://learn.greeks.live/path/what-is-the-legal-difference-between-a-pre-functional-token-and-a-consumptive-use-token/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Legal Difference between a "Pre-Functional" Token and a "Consumptive Use" Token?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Engineering-of-Digital-Asset-Collateralized-Debt-Obligations-and-Volatility-Exposure.webp)

Pre-functional tokens have no utility and are likely securities; consumptive use tokens are actively used and are likely non-securities.

### [How Does a "Basis Trade" Utilize the Settlement Mechanism of a Physically-Settled Future?](https://learn.greeks.live/path/how-does-a-basis-trade-utilize-the-settlement-mechanism-of-a-physically-settled-future/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does a "Basis Trade" Utilize the Settlement Mechanism of a Physically-Settled Future?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Machining-of-Spindle-Assembly-Interfacing-with-High-Reflectivity-Digital-Asset-Ledger-Substrate.webp)

Basis trades profit from the forced price convergence between the future and spot at physical settlement.

### [What Is the Difference between a 'Token Burn' and 'Token Lockup'?](https://learn.greeks.live/path/what-is-the-difference-between-a-token-burn-and-token-lockup/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Difference between a 'Token Burn' and 'Token Lockup'?](https://learn.greeks.live/wp-content/uploads/2025/10/Streamlined-Aerodynamic-Finial-Detailing-Reflecting-Liquidity-Pool-Efficiency-in-Decentralized-Finance.webp)

Burn is permanent removal from supply; lockup is temporary inaccessibility, often for vesting or staking.

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