What is Margin Call?
Crypto Glossary Definition
When the value of a brokerage account falls below a minimum amount, a margin call is the request for additional funds to meet that minimum requirement.
Why Margin Call Matters
A margin call is a warning that a leveraged position's collateral has dropped close to the liquidation threshold, giving the trader a chance to add more funds or reduce the position before it's forcibly closed.
Margin Call in Practice
Suppose a trader deposits $2,000 as collateral and opens a 10x leveraged long position on Bitcoin worth $20,000. Shortly after, the price begins drifting downward. As the position's unrealized losses grow, the exchange continuously recalculates the account's margin ratio — the buffer between the current collateral value and the point where the position would be automatically liquidated. When Bitcoin falls far enough that this buffer shrinks to a critical level, the exchange sends a margin call: a notification warning the trader that unless additional funds are deposited or part of the position is closed, the remaining collateral will be forcibly sold to cover the loss. The trader now has a choice. They could wire in more USDC to top up the collateral and buy some breathing room, hoping the price recovers. Alternatively, they could reduce the position size themselves, locking in a smaller loss but avoiding a full liquidation. If they do nothing and the price keeps falling, the exchange's liquidation engine steps in automatically, closing the position and often charging a liquidation fee on top of the loss already incurred. Because margin calls on volatile crypto assets can arrive within minutes during a sharp move, many traders set price alerts well above their actual liquidation level, giving themselves time to react before the exchange forces the decision for them.
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