# What Is a Liquidation Cascade and How Does It Differ from a Standard Margin Call? ⎊ Path

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

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## What Is a Liquidation Cascade and How Does It Differ from a Standard Margin Call?

A standard margin call is a request for an individual trader to add more funds to their account. A liquidation cascade is a chain reaction that follows.

When a trader fails a margin call, their broker forcibly sells their assets. This large sell order pushes the market price down, which in turn causes other leveraged traders' positions to fall below margin requirements.

This triggers a new wave of forced liquidations, creating a domino effect where each liquidation triggers the next, rapidly accelerating the death spiral.

- [Do Decentralized Exchanges (DEXs) Handle Liquidations Differently than Centralized Exchanges (CEXs)?](https://learn.greeks.live/path/do-decentralized-exchanges-dexs-handle-liquidations-differently-than-centralized-exchanges-cexs/)

- [What Is “Liquidation Cascade” in a Highly Volatile Crypto Market?](https://learn.greeks.live/path/what-is-liquidation-cascade-in-a-highly-volatile-crypto-market/)

- [How Do Flash Loan Exploits in DeFi Represent a Form of Systemic Risk?](https://learn.greeks.live/path/how-do-flash-loan-exploits-in-defi-represent-a-form-of-systemic-risk/)

- [Could a 51% Attack on a Smaller Coin Trigger Margin Calls on a Larger, Interconnected Exchange?](https://learn.greeks.live/path/could-a-51-attack-on-a-smaller-coin-trigger-margin-calls-on-a-larger-interconnected-exchange/)

- [What Are the Systemic Risks Associated with the Failure of a Major CCP?](https://learn.greeks.live/path/what-are-the-systemic-risks-associated-with-the-failure-of-a-major-ccp/)

- [What Is Systemic Risk in the Context of Derivatives Clearing?](https://learn.greeks.live/path/what-is-systemic-risk-in-the-context-of-derivatives-clearing/)

- [How Does the Leverage Ratio in Derivatives Trading Determine the Trigger Point for a Liquidation Cascade?](https://learn.greeks.live/path/how-does-the-leverage-ratio-in-derivatives-trading-determine-the-trigger-point-for-a-liquidation-cascade/)

- [Explain the Role of “Stop-Loss Hunting” in Exacerbating a Flash Crash](https://learn.greeks.live/path/explain-the-role-of-stop-loss-hunting-in-exacerbating-a-flash-crash/)

## Glossar

### [Derivatives Trading](https://learn.greeks.live/area/derivatives-trading/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Leverage ⎊ Derivatives trading, within cryptocurrency, options, and financial markets, fundamentally represents a contractual agreement where value is derived from an underlying asset, enabling amplified exposure without necessitating outright ownership.

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

Trigger ⎊ A liquidation cascade, within cryptocurrency and derivatives markets, initiates when an asset’s price declines sufficiently to trigger margin calls for leveraged positions.

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

Trigger ⎊ A standard margin call in cryptocurrency derivatives, including options, represents a demand from a broker to deposit additional funds into a margin account when the account’s equity falls below the maintenance margin requirement, a level established to cover potential losses.

## Discover More

### [Does a Margin Call Always Lead to Liquidation If Ignored?](https://learn.greeks.live/path/does-a-margin-call-always-lead-to-liquidation-if-ignored/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Does a Margin Call Always Lead to Liquidation If Ignored?](https://learn.greeks.live/wp-content/uploads/2025/10/Tokenized-Asset-Settlement-Mechanism-Examining-Digital-Rights-Management-and-Derivative-Lifecycle-Convergence.webp)

Yes, ignoring a margin call will lead to forced liquidation if the margin remains below the required maintenance level.

### [Define the Term "Liquidation Cascade."](https://learn.greeks.live/path/define-the-term-liquidation-cascade/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Define the Term "Liquidation Cascade."](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Exchange-Liquidity-Pool-Crosscurrents-Modeling-Volatility-Surface-Skewness.webp)

A chain reaction where forced liquidations cause further price drops, triggering more liquidations.

### [How Do Options on Perpetual Futures Differ from Standard Crypto Options?](https://learn.greeks.live/path/how-do-options-on-perpetual-futures-differ-from-standard-crypto-options/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Do Options on Perpetual Futures Differ from Standard Crypto Options?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Instrument-Mimicking-Digital-Asset-Volatility-Surface-Mapping-for-Option-Pricing-Models.webp)

Standard options settle on spot price; perps options settle on the perpetual futures price, introducing funding rate volatility into the pricing.

### [What Is a 'Liquidation Cascade' and How Does It Relate to Volatility?](https://learn.greeks.live/path/what-is-a-liquidation-cascade-and-how-does-it-relate-to-volatility/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is a 'Liquidation Cascade' and How Does It Relate to Volatility?](https://learn.greeks.live/wp-content/uploads/2025/10/Geometric-Crystaline-Structure-Reflecting-Volatility-Surface-Skew-in-Digital-Asset-Hedging-Mechanisms.webp)

A feedback loop where forced selling from mass liquidations accelerates a volatile price move, triggering further liquidations.

### [What Is a "Liquidation Cascade" in the Context of DeFi Lending or Derivatives?](https://learn.greeks.live/path/what-is-a-liquidation-cascade-in-the-context-of-defi-lending-or-derivatives/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is a "Liquidation Cascade" in the Context of DeFi Lending or Derivatives?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Actuation-Dynamics-of-Near-Zero-Latency-Hardware-Wallet-Seed-Phrase-Retrieval-Mechanism.webp)

A self-reinforcing downward price spiral caused by a large volume of forced liquidations, leading to market destabilization.

### [What Is the Mathematical Relationship between Initial Margin, Maintenance Margin, and Maximum Loss before Liquidation?](https://learn.greeks.live/path/what-is-the-mathematical-relationship-between-initial-margin-maintenance-margin-and-maximum-loss-before-liquidation/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Mathematical Relationship between Initial Margin, Maintenance Margin, and Maximum Loss before Liquidation?](https://learn.greeks.live/wp-content/uploads/2025/10/Crystalline-Bifurcation-Modeling-Volatility-Surface-Geometry-in-Decentralized-Finance-Structures.webp)

The difference between initial and maintenance margin equals the maximum unrealized loss the account can sustain before liquidation.

### [What Is "Liquidation Cascade" in a Highly Volatile Crypto Market?](https://learn.greeks.live/path/what-is-liquidation-cascade-in-a-highly-volatile-crypto-market/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is "Liquidation Cascade" in a Highly Volatile Crypto Market?](https://learn.greeks.live/wp-content/uploads/2025/10/Abstract-Visualization-of-Decentralized-Finance-Option-Structure-Unfolding-Towards-Liquidity-Pool-Access.webp)

A sharp price drop triggers a wave of forced liquidations, which further depresses the price, causing more liquidations in a spiral.

### [How Does Liquidation Work and What Is a Liquidation Cascade?](https://learn.greeks.live/path/how-does-liquidation-work-and-what-is-a-liquidation-cascade/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does Liquidation Work and What Is a Liquidation Cascade?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Finance-Synthetic-Asset-Collateralization-Mechanism-Unveiling-Layer-Two-Settlement-Finality.webp)

Forced position closure by the exchange; a cascade is the chain reaction of liquidations driving prices lower.

### [What Role Does the Exchange's Liquidation Engine Play in a Cascade?](https://learn.greeks.live/path/what-role-does-the-exchanges-liquidation-engine-play-in-a-cascade/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Role Does the Exchange's Liquidation Engine Play in a Cascade?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Machining-of-Decentralized-Exchange-Automated-Market-Maker-Mechanism-Interface-Geometry.webp)

It is the automated system that sells liquidated collateral, and the forced market selling exacerbates the price drop, fueling the cascade.

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**Original URL:** https://learn.greeks.live/learn/what-is-a-liquidation-cascade-and-how-does-it-differ-from-a-standard-margin-call/
