What Is a Crypto 'Liquidation' — How Forced Liquidation Works
What liquidation is in leveraged trading and why it happens, plus the difference between long and short liquidations — explained simply.
Liquidation is when losses in a leveraged (margin) trade grow large enough that margin runs short, and the exchange force-closes the position. It's often called 'forced liquidation,' and it's different from a trader's own take-profit or stop-loss.
For example, with 10× leverage on a long (betting up), a drop of roughly 10% can exhaust all margin and hit the liquidation price. At that point the position is force-closed at market and the trader loses their margin.
A long liquidation is an up-bet force-closed by a falling price; a short liquidation is a down-bet force-closed by a rising price. When one side liquidates in a chain, market orders pour in the same direction and volatility spikes — a 'liquidation cascade.'
Whale Story aggregates liquidation data from public exchanges like Bybit and OKX in real time to show 24h long/short liquidation size, per-coin liquidations, and large single liquidations. Aggregate liquidation figures are estimates from public feeds and do not cover every exchange.
FAQ
How is liquidation different from a stop-loss?
A stop-loss is when the trader closes at a price they set in advance; liquidation is when the exchange force-closes due to insufficient margin.
How is the liquidation price determined?
The exchange calculates it from entry price, leverage (margin ratio), and maintenance margin. Higher leverage puts the liquidation price closer to entry, raising risk.
Can liquidation data tell me when to trade?
Liquidation is a reference indicator for observing volatility only — it does not tell you future prices or trade timing. It is not investment advice.