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# Crypto liquidation explained: how a 1.5% drop can close a 50x long
- URL: https://bullquill.com/crypto-liquidations-explained/
- Published: 2026-10-24T20:15:10.000Z
- Updated: 2026-10-24T20:26:10.000Z
- Description: Exchanges force-close leveraged positions when margin falls below maintenance. At 5x, a long survives about a 19.5% drop; at 50x, about 1.5%. When Bitcoin slipped below $80,000, about $291 million was liquidated in an hour, 94% of it longs.
- Author: Rowan Ashby
- Tags: Crypto, Explainer, Bitcoin, Crypto Liquidations, Leverage, CoinGlass, Perpetual Futures, #lang-en, #evergreen, #tr-crypto-liquidations-explained

## Key takeaways

- A crypto liquidation is the forced closing of a leveraged position by an exchange when the trader's margin falls below the maintenance margin the venue requires.
- The higher the leverage, the closer the liquidation price sits to the entry price: with a 0.5% maintenance rate, a 50x long is closed after a drop of about 1.5%, and a 5x long after about 19.5%.
- Exchanges trigger liquidations on a mark price, not the last trade, and use insurance funds and auto-deleveraging (ADL) when a position cannot be closed before its margin runs out.
- Cascades happen because each forced sale pushes the price toward the next cluster of liquidation prices. When Bitcoin slipped below $80,000 on October 24, 2026, about $291 million was liquidated in one hour, 94% of it in longs, according to CoinGlass data.
- CoinGlass totals are useful but incomplete: some exchanges do not report every forced order, so real figures can be higher.

Crypto liquidation explained: an exchange force-closes a leveraged position when the trader's margin falls below the required maintenance margin. When Bitcoin slid to about $79,700 at 15:11 UTC on October 24, 2026, per CoinDesk, roughly $291 million was liquidated within an hour.

This guide explains the moving parts behind that number: initial and maintenance margin, how a liquidation price is worked out, isolated and cross margin, funding rates, insurance funds, auto-deleveraging, and why long squeezes tend to snowball. It ends with a short guide to reading CoinGlass liquidation data. For the news behind Saturday's drop, see our report on [why Bitcoin fell below $80,000](https://bullquill.com/why-bitcoin-fell-below-80000/).

## What is a liquidation in crypto?

Most liquidations happen in perpetual futures ("perps"), the contracts that track a coin's price without an expiry date and that dominate crypto derivatives trading. A trader posts collateral, called margin, and the exchange lets them hold a position several times larger than that deposit. That multiple is the leverage.

Leverage magnifies gains and losses by the same factor. At 10x, a 1% move against the position costs 10% of the margin. If losses eat the margin down to a minimum level, the exchange's risk engine takes over the position and closes it. That is the liquidation. The trader does not choose the timing, and the remaining margin, if any is left, may be lost to fees or to the exchange's insurance fund.

Liquidations exist to protect the exchange and the traders on the other side. In a futures market, every winning position is paid by a losing one. If a losing trader's balance went negative and stayed open, the venue would be left with a debt it could not collect.

## Initial margin vs maintenance margin

Two margin levels matter.

- **Initial margin** is the deposit needed to open a position. It equals the position value divided by the leverage. A $80,000 position at 10x needs $8,000.
- **Maintenance margin** is the minimum equity needed to keep the position open. It is a percentage of the position value; Bybit's worked example uses 0.5%, and rates are typically higher for larger positions or riskier coins.

Rules vary by venue. Bybit's help centre shows maintenance margin set by risk-limit tiers, so the rate rises as a position grows. On the decentralised exchange Hyperliquid, the documentation sets maintenance margin at half the initial margin required at maximum leverage, which works out to about 1.25% of position value for assets that allow 40x. Liquidation is triggered when the account's equity, meaning margin plus unrealised profit or loss, falls to the maintenance level.

## How a liquidation price is calculated

For an isolated position with no extra margin added, a simplified version of the formula published by Bybit is:

- **Long:** liquidation price = entry price × (1 − 1/leverage + maintenance margin rate)
- **Short:** liquidation price = entry price × (1 + 1/leverage − maintenance margin rate)

Bybit's own worked example uses a 20,000 USDT entry at 50x with a 0.5% maintenance rate: initial margin is 400 USDT, maintenance margin is 100 USDT, and the long is liquidated at 19,700 USDT. Real liquidation prices differ slightly because of trading fees, the size tier and any margin added later.

The table applies the same formula to a one-Bitcoin position opened at $80,000, close to where Bitcoin traded on October 24, 2026, with a 0.5% maintenance rate and no fees. It is an illustration of the arithmetic, not a quote from any exchange.

| Leverage | Initial margin | Maintenance margin | Long liquidation price | Move that liquidates a long | Short liquidation price | Move that liquidates a short |
| -------- | -------------- | ------------------ | ---------------------- | --------------------------- | ----------------------- | ---------------------------- |
| 5x       | $16,000        | $400               | $64,400                | −19.5%                      | $95,600                 | +19.5%                       |
| 10x      | $8,000         | $400               | $72,400                | −9.5%                       | $87,600                 | +9.5%                        |
| 20x      | $4,000         | $400               | $76,400                | −4.5%                       | $83,600                 | +4.5%                        |
| 50x      | $1,600         | $400               | $78,800                | −1.5%                       | $81,200                 | +1.5%                        |

*Calculation: Bullquill, using the isolated-margin formula in Bybit's help centre. Entry $80,000, position size 1 BTC, maintenance margin rate 0.5%, fees ignored.*

The pattern is the point. Doubling leverage roughly halves the distance to liquidation. At 50x, a normal hourly swing in Bitcoin is enough. On October 24, CoinDesk reported that Bitcoin was down 2.2% over 24 hours, a move larger than the 1.5% cushion of a 50x long.

### Why the mark price matters

Exchanges do not liquidate on the last traded price, which a single large order can push around. They use a **mark price**, usually built from spot prices on several external venues plus the contract's own order book. Hyperliquid's documentation says its mark price combines prices from centralised exchanges with its own book state. This reduces liquidations caused by a brief wick on one venue, but the mark price can still move fast in a real sell-off.

## Isolated vs cross margin

The margin mode decides how much of an account is at risk.

- **Isolated margin** ring-fences a position. Only the margin assigned to it can be lost, and its liquidation price depends on the leverage chosen.
- **Cross margin** pools the whole account balance behind all open positions. A losing position can draw on free balance, which pushes its liquidation price further away, but if liquidation happens, more of the account can be lost.

Hyperliquid's documentation spells out the difference: when a cross-margin account is liquidated by its backstop, all cross positions and cross margin pass to the liquidator, and an account with no isolated positions ends at zero. In isolated mode, only that position and its margin are transferred.

## Funding rates: the cost of holding a perpetual

Perpetual futures have no expiry, so exchanges use a **funding rate** to keep the contract price close to the spot price. When the perp trades above spot, longs pay shorts. When it trades below, shorts pay longs. The exchange passes the payments between traders and does not keep them.

Hyperliquid publishes its formula: funding equals the average premium of the perp over its oracle price plus an interest component of 0.01% per eight hours, with that adjustment clamped at ±0.05%. It pays funding every hour, at one-eighth of the eight-hour rate, and caps it at 4% per hour. Many centralised exchanges settle every eight hours by default.

Funding matters for liquidations in two ways. Payments come out of the position's margin, so a leveraged long that pays funding for days slowly moves closer to its liquidation price. And persistently high positive funding is a sign that many traders are leveraged long, which is the set-up for a long squeeze.

## Insurance funds and auto-deleveraging

In a fast market, the risk engine may not be able to close a position before its losses exceed its margin. The price at which the margin is fully used up is the **bankruptcy price**. Exchanges then follow a sequence that usually looks like this:

1. The position is closed in the market. If it fills better than the bankruptcy price, any leftover margin typically goes to the exchange's insurance fund.
2. If it fills worse, the **insurance fund** covers the shortfall. OKX's learning centre describes its insurance fund as a reserve that covers such shortfalls.
3. If the fund cannot cover the gap, **auto-deleveraging (ADL)** closes profitable positions on the other side to absorb the loss.

ADL is the step traders like least, because it can close a winning position without warning. Hyperliquid's documentation says ADL starts when an account or isolated position turns negative, ranks opposing traders by unrealised profit and leverage, and closes the chosen positions at the previous mark price. Many centralised exchanges use similar ranking systems and show an ADL priority indicator on open positions.

## Why liquidation cascades happen

A liquidation is a forced market order. When a long is liquidated, the exchange sells; when a short is liquidated, it buys. That creates a feedback loop.

1. Price falls toward a level where many longs have their liquidation prices, often just below round numbers such as $80,000 or recent lows.
2. The first liquidations sell into the order book, pushing the mark price lower.
3. That lower price reaches the next group of liquidation prices, triggering more forced selling.
4. Thin liquidity, common at weekends and overnight, makes each forced order move the price further.

This is a **long squeeze**. The mirror image, a **short squeeze**, sends prices sharply higher as shorts are forced to buy back. Saturday's move fits the long-squeeze pattern: according to CoinGlass data reported by Odaily and republished by KuCoin News, $274 million of the $291 million liquidated in the hour was in long positions, with about $87 million in Bitcoin and $70 million in Ether.

The largest recorded example came on October 10–11, 2025, after US President Donald Trump threatened 100% tariffs on Chinese imports. CoinGlass data put liquidations above $19 billion over 24 hours, the biggest on its records, and CoinGlass said the true total was likely higher.

| Event                                   | Window   | Liquidated         | Share in longs               | Data                                 |
| --------------------------------------- | -------- | ------------------ | ---------------------------- | ------------------------------------ |
| Bitcoin below $80,000, October 24, 2026 | 1 hour   | About $291 million | About 94% ($274 million)     | CoinGlass, via Odaily/KuCoin News    |
| Tariff shock, October 10–11, 2025       | 24 hours | Above $19 billion  | Up to about 90%, per Forklog | CoinGlass, via Forklog and Coinpedia |

## How to read CoinGlass liquidation data

CoinGlass is the most widely quoted aggregator of crypto liquidation figures, and its numbers appear in most market reports, including [our daily crypto brief](https://bullquill.com/crypto-daily-brief-2026-10-23/). Its liquidation page shows:

- **Totals for 1, 4, 12 and 24 hours**, split into long and short liquidations. A long figure much larger than the short figure points to a long squeeze.
- **Breakdowns by exchange and by coin**, which show where leverage was concentrated.
- **The largest single liquidation order** and a live feed of forced orders.
- **Historical charts** that plot liquidations against the Bitcoin price.

Three cautions help when reading it. First, totals depend on what exchanges publish; after the October 2025 crash, CoinGlass noted that Binance reports only one liquidation order per second, so figures can understate the real total. Second, liquidation "heatmaps" and "levels" are estimates of where positions might be liquidated, built from models, not lists of actual orders. Third, a large liquidation figure describes what already happened. It does not say which way the price will move next.

Liquidation data is best read alongside other flow measures, such as [Bitcoin ETF inflows and outflows](https://bullquill.com/bitcoin-etf-flows-explained/), which show whether unleveraged buyers or sellers are active at the same time.

## What it means

Liquidations are not a sign that something broke. They are the system working as designed: leverage is borrowed risk, and the exchange takes it back when the collateral runs out. The table above shows why so many positions disappear in moves that look modest on a daily chart. At 20x or 50x, a 2% swing is enough.

Regulators have taken note of these risks. The UK Financial Conduct Authority banned the sale of crypto derivatives to retail consumers from January 6, 2021, citing extreme volatility, the lack of a reliable basis for valuing the underlying assets and consumers' limited understanding of the products. Readers who want to understand the products that limit losses without leverage can see our explainer on [Bitcoin downside-protection ETFs](https://bullquill.com/bitcoin-downside-protection-etfs-explained/).

For readers following the market, the practical lesson is about interpretation. A spike in long liquidations shows that leverage was crowded on one side and has been cleared. Whether that marks a turning point is a separate question, and the data alone cannot answer it.

## Frequently asked questions

### What does liquidation mean in crypto?

A liquidation is the forced closing of a leveraged position by an exchange when the trader's margin falls to the maintenance margin level. The exchange closes the position in the market so that losses do not exceed the collateral the trader posted.

### How is a crypto liquidation price calculated?

For an isolated long with no extra margin, a simplified formula is entry price × (1 − 1/leverage + maintenance margin rate); for a short it is entry price × (1 + 1/leverage − maintenance margin rate). With a 0.5% maintenance rate, a 10x long opened at $80,000 is liquidated near $72,400, before fees.

### Why do crypto liquidations cascade?

Each liquidation is a forced market order. When longs are liquidated, the exchange sells, which pushes the price toward the next cluster of liquidation prices and triggers more forced selling. Thin liquidity, such as at weekends, makes the effect stronger.

### How much was liquidated when Bitcoin fell below $80,000 on October 24, 2026?

CoinGlass data reported by Odaily and republished by KuCoin News showed about $291 million in liquidations in one hour, of which about $274 million was in long positions.

## Sources

- [CoinDesk: Crypto under weekend pressure, bitcoin slides below $80,000 on U.S. Middle East evacuations (Oct 24, 2026)](https://www.coindesk.com/markets/2026/10/24/crypto-under-weekend-pressure-bitcoin-slides-below-usd80-000-on-u-s-middle-east-evacuations?ref=bullquill.com)
- [KuCoin News (Odaily, CoinGlass data): BTC falls below $80,000, $291M in liquidations in one hour](https://www.kucoin.com/news/flash/btc-falls-below-80-000-291m-in-liquidations-in-1-hour?ref=bullquill.com)
- [CoinGlass: Crypto liquidation data](https://www.coinglass.com/LiquidationData?ref=bullquill.com)
- [Bybit Help Center: Liquidation price, USDT perpetual and expiry contracts](https://www.bybit.com/en/help-center/article/Liquidation-Price-USDT-Contract?ref=bullquill.com)
- [Hyperliquid Docs: Liquidations](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/liquidations?ref=bullquill.com)
- [Hyperliquid Docs: Funding](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding?ref=bullquill.com)
- [Hyperliquid Docs: Auto-deleveraging](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/auto-deleveraging?ref=bullquill.com)
- [OKX Learn: What are perpetual contracts?](https://www.okx.com/learn/what-is-perpetual-contracts?ref=bullquill.com)
- [UK Financial Conduct Authority: FCA bans the sale of crypto-derivatives to retail consumers (Oct 6, 2020)](https://www.fca.org.uk/news/press-releases/fca-bans-sale-crypto-derivatives-retail-consumers?ref=bullquill.com)
- [Forklog: Forced liquidations in 2025 surpass $150 billion](https://forklog.com/en/forced-liquidations-in-2025-surpass-150-billion/?ref=bullquill.com)
- [Coinpedia via TradingView: Crypto liquidation hits $19B as Trump's China tariff triggers market crash](https://www.tradingview.com/news/coinpedia:3f890c8be094b:0-crypto-liquidation-hits-19b-as-trump-s-china-tariff-triggers-market-crash/?ref=bullquill.com)

This article is for information only and is not investment advice.