# What Is the Difference between a 'Soft' and 'Hard' Liquidation? ⎊ Path

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

---

## What Is the Difference between a ‘Soft’ and ‘Hard’ Liquidation?

A 'soft' liquidation is a more gradual process, often involving an automated deleveraging mechanism where a portion of the user's position is closed to bring the margin back above the maintenance level. A 'hard' liquidation involves the immediate and complete closure of the entire leveraged position once the maintenance margin is breached.

Soft liquidations are generally preferred as they minimize the impact on the market and the user's losses.

- [Explain the Difference between “Partial” and “Full” Liquidation](https://learn.greeks.live/path/explain-the-difference-between-partial-and-full-liquidation/)

- [How Does a Breach Affect the ‘Risk-Free Rate’ Assumption in Option Pricing?](https://learn.greeks.live/path/how-does-a-breach-affect-the-risk-free-rate-assumption-in-option-pricing/)

- [What Is the Difference between a Soft Fork and a Hard Fork in Response to a Chain Reorganization?](https://learn.greeks.live/path/what-is-the-difference-between-a-soft-fork-and-a-hard-fork-in-response-to-a-chain-reorganization/)

- [What Is the Difference between a Soft and Hard Liquidation?](https://learn.greeks.live/path/what-is-the-difference-between-a-soft-and-hard-liquidation/)

- [Is the Entire Position Liquidated Immediately upon Failure?](https://learn.greeks.live/path/is-the-entire-position-liquidated-immediately-upon-failure/)

- [How Much Time Is Typically Given to Meet a Margin Call in CeFi?](https://learn.greeks.live/path/how-much-time-is-typically-given-to-meet-a-margin-call-in-cefi/)

- [What Is the Difference between a Soft Fork and a Hard Fork in Relation to Block Size Changes?](https://learn.greeks.live/path/what-is-the-difference-between-a-soft-fork-and-a-hard-fork-in-relation-to-block-size-changes/)

- [What Is the Difference between a Soft Liquidation and a Hard Liquidation?](https://learn.greeks.live/path/what-is-the-difference-between-a-soft-liquidation-and-a-hard-liquidation/)

## 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)

Amplification ⎊ A leveraged position within cryptocurrency, options, or derivatives fundamentally alters risk-reward dynamics through the utilization of borrowed capital or contractual obligations.

### [Automated Deleveraging](https://learn.greeks.live/area/automated-deleveraging/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Mechanism ⎊ Automated Deleveraging is a backstop mechanism implemented by certain cryptocurrency derivatives exchanges to manage systemic risk following a large, unfillable liquidation event.

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

Liquidation ⎊ A soft liquidation, within the context of cryptocurrency derivatives and options trading, represents a controlled reduction of exposure, typically occurring when margin requirements are breached but before a forced liquidation event is triggered by the exchange or clearinghouse.

## Discover More

### [What Is the Difference between a Soft Peg and a Hard Peg?](https://learn.greeks.live/path/what-is-the-difference-between-a-soft-peg-and-a-hard-peg/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Difference between a Soft Peg and a Hard Peg?](https://learn.greeks.live/wp-content/uploads/2025/10/Abstract-Depiction-of-Cross-Hedged-Digital-Asset-Volatility-Surface-and-Structured-Products.webp)

A soft peg allows small fluctuations around the target price; a hard peg commits to an exact 1:1 ratio, usually with full collateralization and instant redemption.

### [What Is the Trade-off between Using High Leverage and a Wider Liquidation Buffer?](https://learn.greeks.live/path/what-is-the-trade-off-between-using-high-leverage-and-a-wider-liquidation-buffer/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Trade-off between Using High Leverage and a Wider Liquidation Buffer?](https://learn.greeks.live/wp-content/uploads/2025/10/Quantum-Slipstream-Protocol-Interfacing-Micro-Gap-in-Algorithmic-Execution-Framework.webp)

High leverage offers high profit potential but results in a narrow liquidation buffer, increasing the risk of rapid liquidation.

### [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.

### [How Does the "Hard-to-Borrow" Nature of Some Altcoins Affect Reverse Cash-and-Carry Arbitrage?](https://learn.greeks.live/path/how-does-the-hard-to-borrow-nature-of-some-altcoins-affect-reverse-cash-and-carry-arbitrage/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the "Hard-to-Borrow" Nature of Some Altcoins Affect Reverse Cash-and-Carry Arbitrage?](https://learn.greeks.live/wp-content/uploads/2025/10/Symmetric-Quantum-Entanglement-Propulsion-Architectures-Modeling-Decentralized-Finance-Derivatives-Exchange-Execution.webp)

Makes execution difficult or impossible due to lack of supply for shorting, or the high borrowing cost eliminates profit.

### [What Role Does an Exchange's API Play in Soft Liquidation Strategies?](https://learn.greeks.live/path/what-role-does-an-exchanges-api-play-in-soft-liquidation-strategies/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Role Does an Exchange's API Play in Soft Liquidation Strategies?](https://learn.greeks.live/wp-content/uploads/2025/10/Symmetrical-Digital-Asset-Interfacing-Mechanism-Representing-Hedging-Strategies-in-Decentralized-Finance.webp)

The API enables the exchange's risk engine to execute partial closure orders and allows traders to automate deleveraging.

### [How Does the Liquidation Process Differ between Cross and Isolated Margin?](https://learn.greeks.live/path/how-does-the-liquidation-process-differ-between-cross-and-isolated-margin/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Liquidation Process Differ between Cross and Isolated Margin?](https://learn.greeks.live/wp-content/uploads/2025/10/Geometric-Abstraction-of-Balance-Sheet-Equilibrium-in-Decentralized-Finance-Derivatives-Settlement.webp)

Isolated liquidation only uses the position's dedicated margin; cross liquidation uses the entire account balance as collateral.

### [What Is 'Forced Liquidation' and Why Does an Exchange Perform It?](https://learn.greeks.live/path/what-is-forced-liquidation-and-why-does-an-exchange-perform-it/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is 'Forced Liquidation' and Why Does an Exchange Perform It?](https://learn.greeks.live/wp-content/uploads/2025/10/Illuminated-Cyanic-Digital-Tubing-Encircling-Subdued-Spherical-Volumetric-Structures-Abstracted-Financial-Modeling.webp)

An exchange automatically closes a trader's position to prevent losses from exceeding their account balance.

### [What Is the Difference between a 'Soft' and 'Hard' Treasury Proposal?](https://learn.greeks.live/path/what-is-the-difference-between-a-soft-and-hard-treasury-proposal/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Difference between a 'Soft' and 'Hard' Treasury Proposal?](https://learn.greeks.live/wp-content/uploads/2025/10/Futuristic-Intersecting-Metallic-Blades-Representing-Decentralized-Finance-Protocol-Mechanism-Structure.webp)

Soft proposals are informal discussions for sentiment; hard proposals are formal, on-chain, binding votes executed by a smart contract.

### [How Does the Liquidation Mechanism Differ between a Leveraged Token and a Leveraged Perpetual Future?](https://learn.greeks.live/path/how-does-the-liquidation-mechanism-differ-between-a-leveraged-token-and-a-leveraged-perpetual-future/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Liquidation Mechanism Differ between a Leveraged Token and a Leveraged Perpetual Future?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Exchange-Mechanism-Core-Component-Modeling-for-Volatility-Surface-Calibration-in-DeFi-Options.webp)

Tokens liquidate internally by rebalancing; futures liquidate the user's position and collateral via margin call.

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**Original URL:** https://learn.greeks.live/learn/what-is-the-difference-between-a-soft-and-hard-liquidation/
