How is Upbit's forced liquidation (or margin call) mechanism triggered?

Understanding Upbit's Forced Liquidation Mechanism

Upbit, one of the largest cryptocurrency exchanges in South Korea, operates a margin trading system that allows users to trade with borrowed funds. This increases potential returns but also magnifies risk. When market movements go against a trader’s position, the exchange may initiate a forced liquidation to prevent further losses and protect both the user and the platform.

Conditions That Trigger a Margin Call

Each margin position on Upbit has a required maintenance margin level. If the value of the collateral drops below this level because of price fluctuations, the system flags the account for possible liquidation.

2. The loan-to-value (LTV) ratio exceeds the maximum allowed limit.

Upbit calculates the LTV ratio by dividing the borrowed amount by the total value of the collateral. As asset prices fall, the LTV rises. Once it surpasses the set ceiling—typically around 80% to 90%, depending on the asset—the system begins preparing for liquidation.

3. Insufficient equity in the margin account to cover potential losses.

The account equity, which is the difference between the collateral value and the borrowed amount, must remain above a certain threshold. If equity turns negative or too low, Upbit automatically triggers the liquidation process to close the position.

4. No manual intervention from the user during the warning phase.

Before full liquidation, Upbit usually sends alerts and may require users to deposit additional collateral or repay part of the loan. Failure to act within the grace period results in automatic execution of the liquidation.

5. System-wide risk controls activate during periods of extreme volatility.

During sudden market swings, especially flash crashes or rapid pump-and-dump scenarios, Upbit may expedite liquidations across multiple accounts to maintain platform stability and avoid cascading defaults.

Liquidation Process Execution

Algorithms continuously assess each open margin position, checking collateral levels and price feeds from trusted oracles and internal order books to detect risk exposure.

2. A partial or full sell-off of the user’s collateral assets occurs to repay the debt.

Depending on severity, Upbit may liquidate only enough assets to restore the LTV to safe levels or close the entire position if recovery is not feasible.

3. Users are charged a liquidation fee to cover operational costs and slippage risks.

This fee varies by asset class and market conditions and is deducted directly from the remaining balance after asset sales.

4. Post-liquidation statements are made available to users through the account dashboard.

These records include timestamps, executed prices, fees applied, and final settlement amounts, allowing traders to review what led to the forced closure.

5. Positions closed due to liquidation cannot be reversed or appealed under normal circumstances.

Once the transaction is processed, it becomes final. Traders bear full responsibility for managing their leverage and monitoring their positions.

Risk Management Features on Upbit

Users can see their current LTV, maintenance margin status, and estimated liquidation price before entering or holding a leveraged trade.

2. Customizable alert settings allow proactive notifications via email or app.

Traders can set thresholds for margin usage, enabling early warnings before approaching dangerous levels.

3. Auto-repayment options help reduce outstanding loans when linked wallets have sufficient funds.

This feature minimizes the chance of missed repayments during volatile sessions when manual action might be delayed.

4. Educational resources explain margin mechanics and historical liquidation events.

Upbit provides guides and simulations to help users understand how leverage works and how quickly positions can become risky under pressure.

5. Limited leverage options per asset class restrict excessive exposure.

Certain high-volatility tokens may only allow 2x or 3x leverage, while more stable pairs could permit up to 5x, reducing systemic risk across the platform.

Frequently Asked Questions

What happens to my remaining balance after a forced liquidation?Any residual funds left after repaying the borrowed amount and deducting fees are returned to the user’s spot wallet. If the sale proceeds do not cover the full debt, Upbit absorbs the loss as part of its risk model.

Can I withdraw my collateral during an active margin trade?No. Assets used as collateral are locked until the loan is fully repaid or the position is closed. Attempting to withdraw triggers an immediate margin check and may lead to instant liquidation if thresholds are violated.

Does Upbit notify users before executing a liquidation?Yes. The platform sends push notifications, emails, and in-app alerts when margin levels approach critical points. However, during fast-moving markets, these warnings may come seconds before execution due to rapid price changes.

Are all trading pairs eligible for margin trading on Upbit?No. Only selected cryptocurrencies approved by Upbit’s risk committee support margin functionality. These typically include major coins like BTC, ETH, and a few large-cap altcoins with sufficient liquidity and price stability.