Blitzkurs
Crypto Leverage and Liquidation Explained With Real Numbers
Leverage is the reason crypto traders can turn a small stake into a large position, and the reason many of them lose that stake in minutes. This guide explains how leverage and liquidation work with concrete numbers, so you can see the risk before you take it.
What is leverage?
Leverage lets you open a position larger than the money you put up. The money you put up is called your margin or stake. The position size is margin multiplied by leverage.
With $1,000 of margin and 10x leverage, you control a $10,000 position. A 1% price move on $10,000 is $100, which is 10% of your $1,000. Leverage does not change the market, it only changes how much each move matters to you.
What is liquidation?
Liquidation is the forced closing of your leveraged position when your losses use up (or nearly use up) your margin. The exchange does this automatically to make sure it does not lose money. You do not get a warning call and you cannot negotiate: once the price hits the liquidation level, the position is closed and the margin is gone.
Leverage from 2x to 100x on a $1,000 stake
The table shows the simplified math: how big the position is, how much a 1% move changes your result, and roughly how far the price can move against you before the whole stake is lost.
| Leverage | Position size | 1% move = | Wiped out at about |
|---|---|---|---|
| 2x | $2,000 | $20 (2%) | 50% against you |
| 5x | $5,000 | $50 (5%) | 20% against you |
| 10x | $10,000 | $100 (10%) | 10% against you |
| 20x | $20,000 | $200 (20%) | 5% against you |
| 50x | $50,000 | $500 (50%) | 2% against you |
| 100x | $100,000 | $1,000 (100%) | 1% against you |
The pattern is simple: the distance to liquidation is roughly 100% divided by the leverage. At 10x it is about 10%, at 100x about 1%. Bitcoin can move 1% within a minute, so 100x positions often get liquidated by ordinary noise.
Why real liquidation comes earlier
The table is the simplified version, and it is on the optimistic side. On a real exchange, liquidation usually happens before your margin is completely gone, for a few reasons:
- Maintenance margin. Exchanges require a minimum amount of margin to keep a position open. Once your remaining margin drops to that level, you are liquidated, not at zero.
- Trading fees. Fees are charged on the full position size, not on your margin, and they reduce the cushion you have.
- Funding payments. On perpetual futures you may pay periodic funding while holding, which eats into margin over time.
Here is what fees do. Assume a fee of 0.05% of position size per side (illustrative, rates vary by exchange). At 20x on $1,000 margin, the position is $20,000, so opening costs $10 and closing costs $10. That is $20, or 2% of your margin, before the price has moved at all. At 5x, the same 0.05% fee costs $2.50 per side, or 0.5% of margin round trip.
Real liquidation prices are therefore a bit closer than the table suggests. Our sister project LiquidationBuffer has a free calculator that includes maintenance margin, fees and funding to show how far the market actually has to move.
Isolated vs cross margin
- Isolated margin: only the margin assigned to that position is at risk. If it is liquidated, the rest of your account is untouched.
- Cross margin: your whole account balance backs your positions. That makes liquidation less likely for a single position but can put your entire balance at risk.
Beginners are generally better off understanding isolated margin first, because the maximum loss per trade is clear in advance.
Common mistakes with leverage
- Assuming 10x means 10% room. With fees and maintenance margin it is less. Check the actual liquidation price.
- Using maximum leverage "because it is available". High leverage does not make you right more often, it only makes being wrong fatal.
- Sizing by the potential gain. Decide the size by what you can afford to lose on the trade, then choose the leverage that fits.
- Adding to a losing position. Doubling down pulls the liquidation price closer and turns a small mistake into a large one.
How it works on Blitzkurs: in Scalping Mode you choose leverage from 1x to 100x on a virtual $10,000 account. If a position's loss reaches 100% of the stake you put on it, that position is liquidated and you lose that stake, but the rest of your balance stays. It is a safe place to feel how fast 50x or 100x gets wiped out.
How to learn leverage without paying for it
Open a few paper trades at 3x, then at 10x, then at 50x with the same stake and watch how differently an identical 1% move affects you. Try holding a 100x position for a minute and count how often ordinary price noise liquidates it. A few afternoons of this teach more than any article. For a general practice plan, see Crypto Paper Trading: How to Practice With Virtual Money.