How does Coinbase calculate the liquidation price?

In crypto trading, the liquidation price is when your leveraged position gets auto-closed by the exchange—like on Coinbase—to prevent further losses if the market moves against you.

Jul 27, 2025 at 05:14 am

What Is a Liquidation Price in Crypto Trading?

In cryptocurrency trading, particularly with leveraged positions, the liquidation price is the specific price at which your position is automatically closed by the exchange to prevent further losses. This mechanism protects both the trader and the platform from negative equity. On Coinbase Advanced Trade or Coinbase Futures, when the market moves against your leveraged position and your margin falls below the maintenance threshold, Coinbase triggers a liquidation. Understanding how this price is calculated helps traders manage risk effectively and avoid unexpected closures of their positions.

Key Components That Influence Liquidation Price

To calculate the liquidation price, Coinbase considers several variables:

• Entry price: The price at which you opened the position.
• Leverage used: The multiplier (e.g., 2x, 5x, 10x) that amplifies both gains and losses.
• Position size: The total value of the position in USD or the base asset.
• Maintenance margin rate: A percentage set by Coinbase that defines the minimum margin required to keep the position open.
• Fees and funding rates: These can slightly affect the margin level over time.
  

  Each of these factors directly impacts the liquidation price formula. For example, higher leverage reduces the buffer between your entry price and the liquidation point, making the position more sensitive to price fluctuations.

  How to Calculate Liquidation Price for Long Positions

  
  For a long position (buying with leverage), the liquidation price is calculated using this formula:
  

  Liquidation Price = Entry Price × (1 - Maintenance Margin Rate / Leverage)

  Let’s say you open a long position on BTC/USD:

  • Entry price: $30,000
  • Leverage: 5x
  • Maintenance margin rate: 0.5% (or 0.005)

  Plugging into the formula:
  $30,000 × (1 - 0.005 / 5) = $30,000 × (1 - 0.001) = $29,970

  This means if the price of Bitcoin drops to $29,970, your position will be liquidated. Always verify this in the order preview section of Coinbase Advanced Trade before placing the order.

  How to Calculate Liquidation Price for Short Positions

  
  For a short position (selling with leverage), the formula changes slightly:
  

  Liquidation Price = Entry Price × (1 + Maintenance Margin Rate / Leverage)

  Using the same example:

  • Entry price: $30,000
  • Leverage: 5x
  • Maintenance margin rate: 0.5%

  Calculation:
  $30,000 × (1 + 0.005 / 5) = $30,000 × (1 + 0.001) = $30,030

  If Bitcoin rises to $30,030, your short position will be liquidated. This shows how even small price movements can trigger liquidation under high leverage.

  How to Check Liquidation Price on Coinbase Interface

  
  Coinbase displays the liquidation price automatically when you place a leveraged order:
• Navigate to Advanced Trade or Futures on Coinbase.
• Select the asset (e.g., BTC-USD).
• Choose “Limit” or “Market” order type.
• Enter your position size and leverage.
• In the order summary panel, look for the field labeled “Liquidation Price” — it updates in real-time as you adjust your parameters.
  

  If you’re using a stop-loss order, note that it does not prevent liquidation—it only sets a trigger for closing the position manually. The liquidation price is still determined by the system based on margin levels.

  Common Mistakes That Lead to Unexpected Liquidations

• Ignoring maintenance margin rate changes: Coinbase may update this rate based on market volatility.
• Using maximum leverage without buffer: A position with 20x leverage can liquidate from a 0.5% price move.
• Not accounting for fees: Funding fees in perpetual contracts reduce your available margin over time.
• Assuming liquidation price is static: It shifts if you add or reduce position size after opening.
  

  Always monitor your position equity and margin ratio in the Positions tab on Coinbase. If your margin ratio approaches the maintenance level, consider reducing leverage or adding collateral.

  Frequently Asked Questions

  Q: Does Coinbase notify me before my position gets liquidated?
  
  Yes, Coinbase sends real-time alerts via email or in-app notifications when your position is nearing liquidation. You can also set custom margin ratio alerts in your settings.

  Q: Can I cancel a liquidation once it starts?
  
  No. Once the liquidation process begins, it cannot be canceled. The system automatically closes the position to protect against negative balance. You can only avoid it by manually closing the position or adding margin before liquidation triggers.

  Q: Why is my liquidation price different from what I calculated manually?
  
  Discrepancies may occur due to rounding in the interface, dynamic funding rates, or changes in maintenance margin rates during volatile market conditions. Always rely on the value shown in the Coinbase order preview.

  Q: Does liquidation mean I lose all my funds?
  
  Not necessarily. Liquidation closes only the leveraged position. Any remaining collateral in your futures wallet stays intact unless the position goes deeply negative (which Coinbase prevents via auto-deleveraging or insurance funds).