The liquidation price is the price of a crypto at which LiquidationLiquidationWhen a loan or leveraged position is closed automatically because the collateral or margin no longer covers the debt. begins. It applies both to loans backed by crypto and to leveraged trading. The closer it is to the current price, the smaller the move needed for you to lose money.
An example from lending
You put up 4 ether as collateral when one ether costs US$2,500, so US$10,000 in total. You borrow US$6,000 in a stablecoin, and the liquidation threshold for ether is 80%. The health factorHealth factorA number that shows how well the collateral covers a DeFi loan. If it falls below 1, part of the collateral can be sold to repay the debt. falls below 1 when the collateral's value times 0.80 drops below the debt:
Liquidation price = 6,000 ÷ (4 × 0.80) = US$1,875
If ether falls below US$1,875, a 25% drop, the position can be liquidated. If the debt grows with interest, this price moves closer to the current price.
An example from leveraged trading
You open a leveragedLeverageTrading with borrowed money, which multiplies both gains and losses and can wipe out your whole stake in a short time. long position worth US$10,000 with US$1,000 of margin, which is 10x leverage, when the crypto costs US$100. A 10% fall would wipe out the whole margin. Exchanges close positions sooner than that, though, because they require a maintenance margin. If it is 1% of the position's value, the position is closed when the price reaches about US$90.90, after a fall of just over 9%.
What to keep in mind
The price that counts is usually a price from an OracleOracleA service that brings outside information, such as prices or weather data, into smart contracts on a blockchain. or the exchange's mark price, not necessarily the last traded price. A sudden price dip can therefore trigger liquidation, even if the price recovers quickly.
Everything in Myntkaup Learn is written and regularly reviewed by the Myntkaup editorial team. It is for education and is not investment advice. Editorial policy. Updated 18 October 2026.