# What Is Leverage in Crypto? Margin, Risk and Liquidation

> Leverage lets you open a crypto position larger than your margin. Learn how leverage and margin work, cross vs isolated margin and how it sets liquidation risk.

Updated: 2026-09-23

**Leverage in crypto is the use of borrowed exposure to open a position larger than the collateral, or margin, you put up.** It is expressed as a multiple, such as 5x or 20x. Leverage scales both gains and losses relative to your margin, and it determines how close a position is to [liquidation](/learn/what-is-liquidation).

## Key takeaways

- **Leverage = position size (notional) ÷ margin.**
- **Initial margin** opens a position; **maintenance margin** is the minimum to keep it open.
- A price move of roughly **1 ÷ leverage** against you can wipe out your margin.
- **Isolated margin** caps the loss per position; **cross margin** shares the whole balance.
- [Funding](/learn/what-is-funding-rate) and fees are charged on **notional**, not margin.

## How leverage works

Say you have **$2,000** and use **10x leverage** on a [perpetual futures](/learn/what-are-perpetual-futures) contract. Your position is worth **$20,000**.

- If the price rises 5%, the position gains $1,000, which is **+50%** on your margin.
- If the price falls 5%, the position loses $1,000, which is **−50%** on your margin.

The exchange does not lend you cash to spend elsewhere. It lets you hold exposure larger than your collateral, and closes the position if losses get close to the margin you posted.

## Key margin terms

| Term | Meaning |
|---|---|
| Notional | Full value of the position (size × price) |
| Initial margin | Collateral needed to open the position, roughly notional ÷ leverage |
| Maintenance margin | Minimum collateral to keep it open; below this, liquidation starts |
| Maintenance margin rate | Maintenance margin as a % of notional; usually rises with position size |
| Margin ratio | How close the account is to maintenance margin |
| Unrealized PnL | Profit or loss on open positions, usually based on the [mark price](/learn/mark-price-vs-index-price) |

## Leverage vs distance to liquidation

As a rough guide, the price move that wipes out your initial margin is 1 ÷ leverage. Liquidation happens a little earlier because of maintenance margin and fees.

| Leverage | Margin per $10,000 position | Move that erases margin |
|---|---|---|
| 2x | $5,000 | 50% |
| 5x | $2,000 | 20% |
| 10x | $1,000 | 10% |
| 20x | $500 | 5% |
| 50x | $200 | 2% |
| 100x | $100 | 1% |

## Worked example: liquidation price

You open an isolated **10x long** on BTC at **$50,000**. Assume a maintenance margin rate of **0.5%** and ignore fees. For a linear (USDT-margined) isolated long, a simplified formula is:

**Liquidation price = entry × (1 − 1 ÷ leverage) ÷ (1 − maintenance rate)**

- 1 − 1 ÷ 10 = 0.9
- 1 − 0.005 = 0.995
- $50,000 × 0.9 ÷ 0.995 ≈ **$45,226**

That is a drop of about **9.5%**, not the full 10%. Exchanges use their own formulas, fee buffers and tiered maintenance rates, so check the exact number with the [liquidation price calculator](/tools/liquidation-price-calculator).

## Cross vs isolated margin

| | Isolated margin | Cross margin |
|---|---|---|
| Collateral at risk | Only what you assign to the position | The whole account balance |
| Liquidation | Earlier, per position | Later, but can affect the whole account |
| Best for | Limiting the loss on a single trade | Hedged or multi-position setups where profits offset losses |
| Main danger | Position liquidated while the account still has funds | One bad position can drain everything |

## Leverage in hedged strategies

In a [delta-neutral](/learn/what-is-delta-neutral-trading) trade, such as long spot and short perp, leverage on the short leg still matters. The combined position is flat, but a sharp rally creates a loss on the short while the gain sits elsewhere. Low leverage on the hedge gives room to move funds before liquidation.

## Sizing a position

Many traders size positions by the amount they are willing to lose, not by the maximum leverage offered. Pick a stop-loss distance, decide the dollar risk, and let those set the size. The [position size calculator](/tools/position-size-calculator) does this math, and the [PnL calculator](/tools/pnl-calculator) shows the outcome at different exit prices.

## Frequently asked questions

### What is leverage in crypto?

Leverage is using borrowed exposure to open a position larger than the collateral you post. With 10x leverage, $1,000 of margin controls a $10,000 position, so gains and losses are ten times larger relative to your margin.

### What is the difference between cross and isolated margin?

Isolated margin limits the collateral at risk to the amount assigned to one position. Cross margin shares the whole account balance across positions, which can delay liquidation but puts more of the balance at risk.

### How does leverage affect liquidation price?

Higher leverage means less margin per dollar of position, so a smaller price move wipes it out. At 10x, a move of roughly 10% against you, and slightly less once maintenance margin is included, can trigger liquidation.

### Does leverage increase funding costs?

Funding is charged on the position's notional value, not on your margin. A larger leveraged position pays or receives more funding, and as a share of your margin that cost is multiplied by the leverage.