Liquidation Risk in Crypto: How to Avoid Getting Wiped Out

When you trade crypto with liquidation risk, the chance your leveraged position gets automatically closed because your collateral dropped too low. Also known as margin call, it’s not a warning—it’s a kill switch. If you’re using leverage, this isn’t theoretical. It’s happening right now to people who didn’t check their LTV ratio, how much you’ve borrowed compared to your collateral value. A 70% LTV might seem safe until the market drops 15% in an hour. Then your position vanishes, and your profit turns into a loss you didn’t even ask for.

Crypto leverage, borrowing funds to control a bigger trade than your account balance allows is tempting because it turns $1,000 into $10,000 of exposure. But it also turns a 5% price drop into a 50% loss. That’s why most beginners lose money—they focus on how much they can make, not how fast they can lose it. Platforms like Binance, Bybit, or dYdX don’t care if you get liquidated. They just close your trade and take their fees. Your job is to make sure that doesn’t happen to you.

Real traders don’t just guess their risk. They use tools. They track their DeFi loans, crypto-backed loans on protocols like Aave or Compound that auto-liquidate if collateral falls below a set threshold. They avoid putting all their money into volatile tokens as collateral. Instead, they use stablecoins like USDC or DAI, which don’t swing wildly. They set stop-losses. They keep extra cash on hand. They know that a 10x leveraged trade isn’t a shortcut to riches—it’s a minefield.

You’ll find posts here that show you exactly how people lost everything on high-leverage trades, how others protected themselves using simple LTV rules, and which DeFi platforms are safest for borrowing. Some posts even break down real cases—like someone who lost $8,000 on ETH because they didn’t understand the liquidation price. Others show you how to pick collateral that won’t get you wiped out. This isn’t about getting rich overnight. It’s about staying in the game long enough to actually win.