Crypto Gloss

Leverage

Leverage lets a trader control a position whose notional value is larger than the margin they commit. It magnifies the effect of price changes on that margin. Crypto platforms may offer leverage through spot margin borrowing or through derivatives such as perpetual futures; the mechanics, costs, and liquidation rules differ by product.

For a simple linear position, $100 of margin at 10× leverage represents about $1,000 of exposure. A 1% price move in the trader’s favor would produce roughly $10 in gross profit, while a 1% move against the position would produce roughly $10 in gross loss, before fees, funding, interest, and other adjustments. That is about 10% of the initial $100 margin. This illustration does not predict a real contract’s liquidation price.

How leverage is provided

In spot margin trading, a platform or lending pool may let a customer borrow an asset to increase a spot position. The borrowed amount can accrue interest and must be repaid. With a derivative, the trader takes a contract position tied to an asset’s price; the platform may not lend the underlying coin. Perpetual futures can also involve funding payments between long and short positions.

Leverage is commonly expressed as notional exposure divided by margin. A higher ratio means a given percentage price move has a larger effect relative to the margin. The ratio alone does not show every cost or risk: position size, collateral type, fees, funding, contract design, and other open positions all matter.

Margin and liquidation

Initial margin is collateral required to open a position. Maintenance margin is the minimum equity the position must retain under the venue’s rules. If account equity falls below the maintenance requirement, the platform may reduce or close the position through liquidation. The relevant reference price may be a mark or index price rather than the last trade.

There is no universal rule that a 10× position is liquidated after exactly a 10% adverse move. Maintenance tiers, fees, funding, collateral haircuts, price gaps, and the venue’s calculation can trigger liquidation earlier or change the threshold. In isolated margin, collateral assigned to one position is generally separated from the rest of the account according to platform rules. Cross margin can use eligible account collateral across positions, which may delay one liquidation while exposing more of that collateral.

Risks to understand

A small adverse move can consume a large share of a highly leveraged position’s margin. Liquidation can lock in a loss and may include fees; a fast market can also create slippage. Borrowed spot positions can face interest and collateral-call risks, while derivatives add contract, funding, and venue risks. Using lower leverage does not eliminate the possibility of losing the full amount committed.

Before opening a position, read the venue’s current margin and liquidation rules, understand the product’s payoff, and decide how much collateral could be lost. Avoid relying on a single leverage number or a calculator that assumes a different contract, fee schedule, or margin mode.

Social Media Sentiment

An August 2023 thread in r/CryptoCurrency discussed repeated liquidations in crypto futures and the difficulty of trading with leverage. It reflects the concerns and opinions in that particular conversation, not a verified market-wide liquidation statistic or a representative survey of traders.

Last updated: 2026-10

Related Terms

  • Margin Trading — a trading method that can use borrowed funds and collateral.
  • Liquidation — the forced reduction or closure of a position under platform rules.
  • Perpetual Futures — a derivative contract without a fixed expiry that can carry funding payments.

See Also

Sources