# How Is 'Liquidation' Triggered in a Leveraged Cryptocurrency Position? ⎊ Path

**Published:** 2025-12-04
**Author:** Greeks.live
**Categories:** Path

---

## How Is ‘Liquidation’ Triggered in a Leveraged Cryptocurrency Position?

Liquidation is triggered when the value of the collateral in a leveraged position falls below the Maintenance Margin requirement. The exchange's liquidation engine automatically closes the position to prevent the trader's balance from falling below zero, usually using the Mark Price to avoid flash crash manipulation.

- [What Is Maintenance Margin and Why Is It Crucial for Leveraged Crypto Derivatives?](https://learn.greeks.live/path/what-is-maintenance-margin-and-why-is-it-crucial-for-leveraged-crypto-derivatives/)

- [How Does Liquidation Occur in a Leveraged Perpetual Futures Position?](https://learn.greeks.live/path/how-does-liquidation-occur-in-a-leveraged-perpetual-futures-position/)

- [How Does the Mark Price Affect the Calculation of ‘Maintenance Margin’?](https://learn.greeks.live/path/how-does-the-mark-price-affect-the-calculation-of-maintenance-margin/)

- [How Can Smart Contracts Manage Margin Calls for Leveraged Derivatives?](https://learn.greeks.live/path/how-can-smart-contracts-manage-margin-calls-for-leveraged-derivatives/)

- [What Is the Purpose of ‘Maintenance Margin’ and When Is a Margin Call Triggered?](https://learn.greeks.live/path/what-is-the-purpose-of-maintenance-margin-and-when-is-a-margin-call-triggered/)

- [How Is a Margin Call Triggered When Trading Leveraged Crypto Derivatives?](https://learn.greeks.live/path/how-is-a-margin-call-triggered-when-trading-leveraged-crypto-derivatives/)

- [What Is a “Margin Call” and How Does It Relate to Collateral?](https://learn.greeks.live/path/what-is-a-margin-call-and-how-does-it-relate-to-collateral/)

- [What Is a ‘Margin Call’ and How Is It Related to Leverage?](https://learn.greeks.live/path/what-is-a-margin-call-and-how-is-it-related-to-leverage/)

## Glossar

### [Maintenance Margin](https://learn.greeks.live/area/maintenance-margin/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Collateral ⎊ Within cryptocurrency derivatives and options trading, the maintenance margin represents the minimum equity a trader must maintain in their account to cover potential losses.

### [Leveraged Position](https://learn.greeks.live/area/leveraged-position/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Position ⎊ A leveraged position, within cryptocurrency derivatives, options trading, and broader financial derivatives, represents an exposure exceeding the initial capital outlay, amplified through instruments like perpetual futures contracts, leveraged tokens, or options.

### [Liquidation Engine](https://learn.greeks.live/area/liquidation-engine/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Mechanism ⎊ A Liquidation Engine within cryptocurrency derivatives functions as an automated process triggered by margin calls, designed to mitigate counterparty risk for exchanges and lenders.

## Discover More

### [Define "Liquidation" in the Context of Leveraged Futures Trading](https://learn.greeks.live/path/define-liquidation-in-the-context-of-leveraged-futures-trading/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Define "Liquidation" in the Context of Leveraged Futures Trading](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Finance-Synthetic-Asset-Collateralization-Mechanism-Unveiling-Layer-Two-Settlement-Finality.webp)

Liquidation is the forced closure of a leveraged futures position when account equity falls below the maintenance margin.

### [What Is the Difference between Margin Call and Liquidation?](https://learn.greeks.live/path/what-is-the-difference-between-margin-call-and-liquidation/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Difference between Margin Call and Liquidation?](https://learn.greeks.live/wp-content/uploads/2025/10/Abstract-Volumetric-Visualization-of-Cryptocurrency-Options-Hedging-Strategy-Implementation-Across-Decentralized-Exchanges.webp)

A margin call is a warning to add funds; liquidation is the automatic, forced closure of the position due to insufficient margin.

### [How Does High Volatility Increase the Risk of Slippage in a Highly Leveraged Position?](https://learn.greeks.live/path/how-does-high-volatility-increase-the-risk-of-slippage-in-a-highly-leveraged-position/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does High Volatility Increase the Risk of Slippage in a Highly Leveraged Position?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Machining-of-Metallic-Substrates-Simulating-Blockchain-Settlement-Layers-for-Derivatives-Pricing.webp)

High volatility depletes liquidity; the large liquidation order from a leveraged position executes in this shallow market, causing severe slippage.

### [Can a Trader Prevent Liquidation after a Margin Call?](https://learn.greeks.live/path/can-a-trader-prevent-liquidation-after-a-margin-call/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Can a Trader Prevent Liquidation after a Margin Call?](https://learn.greeks.live/wp-content/uploads/2025/10/Optical-Medium-Delamination-Reflecting-Asymmetric-Futures-Curve-Volatility-Skew.webp)

Yes, by depositing more collateral or partially closing the position to increase the margin ratio above the maintenance level.

### [What Is the Impact of an Isolated Margin Position Liquidation on the Trader's Overall P&L?](https://learn.greeks.live/path/what-is-the-impact-of-an-isolated-margin-position-liquidation-on-the-traders-overall-pl/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Impact of an Isolated Margin Position Liquidation on the Trader's Overall P&L?](https://learn.greeks.live/wp-content/uploads/2025/10/Visualizing-Arbitrage-Equilibrium-Between-Layer-One-Blockchain-Volatility-And-Exotic-Option-Hedging-Strategies.webp)

It realizes the loss only up to the allocated margin for that position, leaving all other open positions and free capital unaffected.

### [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/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does a 'Margin Call' Differ from an Automatic Liquidation in Leveraged Trading?](https://learn.greeks.live/wp-content/uploads/2025/10/Asymmetric-Digital-Asset-Structure-Illuminating-Complex-Option-Hedging-Strategies-Across-Market-Quanta.webp)

A margin call is a warning to add funds; liquidation is the automatic, forced closure of the position due to insufficient margin.

### [What Is Maintenance Margin and Why Is It Crucial for Leveraged Crypto Derivatives?](https://learn.greeks.live/path/what-is-maintenance-margin-and-why-is-it-crucial-for-leveraged-crypto-derivatives/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is Maintenance Margin and Why Is It Crucial for Leveraged Crypto Derivatives?](https://learn.greeks.live/wp-content/uploads/2025/10/Interlocking-Modular-Hardware-Aesthetic-Reflecting-Automated-Market-Maker-Liquidity-Pool-Dynamics.webp)

Maintenance margin is the minimum equity needed to keep a leveraged position open; falling below it triggers a margin call and potential liquidation.

### [How Does the Liquidation Process Work in an Overcollateralized Stablecoin System like MakerDAO?](https://learn.greeks.live/path/how-does-the-liquidation-process-work-in-an-overcollateralized-stablecoin-system-like-makerdao/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Liquidation Process Work in an Overcollateralized Stablecoin System like MakerDAO?](https://learn.greeks.live/wp-content/uploads/2025/10/Exposed-Actuator-Mechanism-Articulating-Beneath-High-Frequency-Automated-Option-Pricing-Surfaces.webp)

Collateral is automatically sold via smart contract when the collateralization ratio drops below a set minimum to cover the debt and penalty.

### [How Can a Trader Avoid Liquidation by Partial Position Closing?](https://learn.greeks.live/path/how-can-a-trader-avoid-liquidation-by-partial-position-closing/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Can a Trader Avoid Liquidation by Partial Position Closing?](https://learn.greeks.live/wp-content/uploads/2025/10/Quantum-Roller-Bearing-Analogy-for-Volatility-Surface-Contango-in-Decentralized-Exchange-Futures.webp)

Closing a portion of the position frees up used margin, increasing free margin and moving the liquidation price away from market price.

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**Original URL:** https://learn.greeks.live/learn/how-is-liquidation-triggered-in-a-leveraged-cryptocurrency-position/
