guide
Margin Calls and Liquidation in Crypto
How margin warnings differ from liquidation, why alerts and stops offer no guarantee, and how collateral, leverage and account rules affect risk.
What a Margin Warning Means
A margin call is a provider's request or warning about insufficient collateral. Its threshold, delivery and available response time depend on the product and account rules. Some crypto derivatives can be liquidated without a warning reaching you first.
Maintenance margin is an ongoing requirement. A maintenance breach may trigger liquidation directly, without a grace period. Warnings, stop triggers and liquidation conditions are distinct; their rules depend on the product and account.
Initial margin
Collateral required to open exposure. In a simplified linear contract, entry notional divided by leverage gives initial margin. Real order costs can also include fees and other requirements.
Maintenance margin
The minimum requirement for retaining exposure. It may depend on position size, mark price, risk tiers and account-level risks. A maintenance breach can trigger liquidation; do not treat it as only a warning.
Illustrative Long: Maintenance Before Zero Equity
One linear long, entry 100, constant base quantity 1, assigned collateral 10, and maintenance fixed at 0.5% of ENTRY notional. Prices and monetary amounts use arbitrary quote units. Fees, funding, tiers, other exposure and collateral changes are excluded. This is neither a warning threshold nor a live venue quote.
For a long under these assumptions, equity equals assigned collateral plus quantity multiplied by the change from entry price. Setting equity equal to maintenance gives Entry − (Collateral − Maintenance) ÷ BASE QUANTITY. Setting it equal to zero gives the separate bankruptcy boundary. Dividing by quote-currency notional instead would mix incompatible units.
| Quantity or boundary | Illustrative value |
|---|---|
| Entry price | 100 |
| Base quantity | 1 |
| Entry notional | 100 |
| Leverage | 10x |
| Assigned collateral | 10 |
| Fixed maintenance amount | 0.5 |
| Maintenance price | 90.5 |
| Adverse move to maintenance | 9.5% |
| Zero-equity price | 90 |
| Adverse move to zero equity | 10% |
Warning vs Liquidation
| Question | Warning or margin call | Liquidation |
|---|---|---|
| What happens? | The provider requests action or sends a risk alert. | The provider cancels orders, reduces or closes exposure under its rules. |
| What triggers it? | A product-specific threshold or risk process; no universal percentage. | The applicable position or account liquidation condition. |
| Is there time to respond? | Delivery and time to act are not guaranteed. | The process can start automatically before an alert or stop is received or executed. |
| What can be lost? | The warning itself does not cap exposure or losses. | The outcome depends on collateral scope, execution, fees, obligations and applicable protections. |
| Does zero equity trigger it? | An alert threshold is separate from this accounting boundary. | Maintenance-based liquidation can begin before equity reaches zero. |
Five Risk Checks
Check leverage and the maintenance buffer #1
With unchanged exposure, more collateral lowers effective leverage and increases the buffer. In this fixed-entry model, 100x reaches maintenance after a 0.5% adverse move, before 1% zero equity; 5x reaches it at 19.5%, before 20%. No leverage level is automatically safe.
Understand stop triggers and execution #2
A triggered stop-market order requests market execution; the fill price can differ and venue controls can reject or cancel it. A stop-limit order can remain unfilled. Mark, index and last-traded prices can reach different thresholds at different times. A stop does not guarantee prevention of liquidation.
Read the actual account risk measure #3
Check how your product defines its margin ratio, required collateral and alert thresholds. Percentages from different formulas are not directly comparable. No universal 80% safe zone applies, and a displayed buffer can change rapidly.
Set an affordable loss budget #4
Relate position size to account equity, a chosen loss budget and the intended exit distance. Allow for slippage and costs, and check whether maintenance could be reached before the stop. A planned loss percentage is an assumption, not a safety guarantee.
Check collateral and response options #5
Review eligible collateral, other positions, orders and any enabled automatic additions. Reducing exposure or adding eligible funds can change margin conditions, but either action may fail or arrive too late. Adding funds also increases the capital exposed to the trade.
Assigned and Shared Collateral
Sources checked 2026-09-12: Bybit for product and margin rules, Bybit for automatic additions, and Bybit for trigger references and execution limits. The numerical example uses this site’s simplified calculator; it is not a quote of those venue rules.
Isolated margin
Assigned collateral supports the specified position separately. Manual additions and enabled automatic replenishment can increase that assignment. Initial margin is not an unconditional lifetime loss cap; costs, obligations and applicable protections matter.
Cross margin
Eligible collateral supports the positions covered by the account's rules. Other positions, orders, liabilities and collateral valuation can change the available support. Sharing collateral does not guarantee a later warning, a longer response window or a smaller loss.
Frequently Asked Questions
What triggers a margin call?
Is there a universal safe margin ratio?
What happens if I ignore a warning?
Can liquidation occur before my stop-loss executes?
Do all crypto products send margin warnings?
Does cross margin always give more time than isolated margin?
Derivatives & Leveraged Products — Important Risk Warning
Derivatives and leveraged products are complex and carry a high risk of rapid, substantial losses. Depending on the product and account rules, losses can exceed the initial margin or money committed. A stand-alone purchased option can lose its entire premium plus transaction costs; writing options, exercising into another position, or combining positions can create additional obligations. An uncovered call writer can face unlimited loss. Applicable legal protections can affect the loss boundary.
You should carefully consider whether you understand how derivatives work and whether you can afford to take the high risk of losing your money. This content is for educational purposes only and does not constitute financial advice, investment advice, or a recommendation to trade derivatives.
Legal availability and regulatory protections depend on the product, service, provider and jurisdiction. In the EU, check the applicable investment-services rules, including MiFID II where relevant, and any product restrictions. Before trading, verify with the relevant regulator whether the provider has the permissions required for the service and whether the product may be offered to you. A website being accessible, or a product appearing on this website, does not establish authorization or eligibility.
Continue Learning
Get Started with Kraken
Sign up in minutes and get started with Kraken — a regulated exchange operating since 2011, with deep liquidity and low fees.
Visit KrakenAd · Digital asset prices are subject to high market risk and price volatility. Don't invest unless you're prepared to lose all the money you invest. Terms & risk disclosure
This page contains affiliate links. We may earn a commission if you sign up, at no extra cost to you.