Liquidation
Forced liquidation · Margin call (used loosely)
When losses in a futures or leveraged trade shrink your margin to the required minimum (the maintenance margin) and the exchange forcibly closes your position.
Simple explanation
Background: Korea's won exchanges (Upbit, Bithumb, Coinone and Digital X, formerly Korbit) offer spot trading only, so futures liquidations happen on overseas exchanges such as Binance.
Futures and margin trading let you trade more than the money you put in (your margin). With ₩1,000,000 of margin at 10x leverage you hold a ₩10,000,000 position, so a 1% price move changes your margin by 10%.
The money you put up to open a position is the initial margin; the minimum that must remain to keep it open is the maintenance margin. When losses shrink your margin to that level, the exchange closes the position for you, selling a long or buying back a short. That is a liquidation, and the price where it happens is the liquidation price.
The higher the leverage, the closer the liquidation price sits to your entry. At 10x a move of about 10% against you would cost the whole margin, and at 50x about 2% would; because of the maintenance margin and fees, liquidation actually comes a little before that.
Most large overseas futures exchanges trigger liquidations off the mark price, not the last traded price. The mark price is built from spot prices on several exchanges, so a brief spike on one exchange does not liquidate you on its own. Trading fees and funding payments also eat into your margin and can pull the liquidation price closer.
The margin mode matters too. Isolated margin puts only the margin assigned to that position at risk; cross margin lets all your positions share the whole futures balance. Cross margin moves the liquidation price further away, but a liquidation can take the whole balance at once. Whatever margin is left at liquidation is usually lost as well, to liquidation fees or the exchange's insurance fund.
Strictly, a margin call is a warning to add margin before you are liquidated, but in Korea the word is often used to mean the liquidation itself. To keep the liquidation price further away, you have to lower your leverage or add margin.
Korean exchanges have no futures, but in 2025 quite a few users of their coin-lending services were force-liquidated when their collateral lost value. Regulators then issued guidelines that bar lending beyond the collateral's value and require warnings before liquidation. If you use such a service, check its liquidation terms.
When prices move fast, liquidation orders push the price further and set off more liquidations (a liquidation cascade). When overseas prices swing first like this, Korean prices follow with a delay, so the kimchi premium can briefly jump or flip into a reverse premium.
Example
Margin ₩1,000,000 at 10x leverage → Bitcoin long position ₩10,000,000 (entry price ₩100,000,000)
Maintenance margin rate 0.5% (assumed) → maintenance margin = 10,000,000 × 0.5% = ₩50,000
Liquidated when the loss reaches 1,000,000 − 50,000 = ₩950,000 → a price move of about -9.5%, so the liquidation price is about ₩90,500,000 (before fees; each exchange's formula differs a little)
Had the price reached ₩90,000,000 (-10%), the loss would be ₩1,000,000, the whole margin → the position is closed before that
How far the price can move before liquidation, same assumptions: 2x about -49.5% · 10x about -9.5% · 50x about -1.5%
Cross margin with a ₩5,000,000 futures balance backing the trade: it survives a move of about -49.5%, but a liquidation can cost up to ₩5,000,000
A short works the other way: at 10x it is liquidated after a rise of about +9.5%
※ Example numbers, for illustration only
See it on CoinGaja
- CoinGaja does not show futures liquidations. To see how the gap between Korean and overseas prices (the kimchi premium) moves when liquidations jolt overseas prices, use these pages:
- Bitcoin Kimchi Premium›
- Price and Kimchi Premium Heatmap›
- CoinGaja Kimchi Premium Index›
Related terms
Comments · ask anything about this term
Comments
No comments yet.