Crypto liquidation occurs when the exchange automatically closes your trade. However, the way it happens varies depending on your trading mode. Here’s the simple answer: Crypto liquidation acts differently in One-Way Mode, Hedge Mode, and Multiple Mode. On BTZO, your choice changes your risk. In One-Way Mode, one wrong move loses the whole trade. Hedge Mode can liquidate both your long and short trades at once. Multiple Mode allows one trade to fail without affecting the others. Knowing this is the key to staying safe.
What is Crypto Liquidation?
Let’s break down what liquidation means before we get into the different modes.
How Does Liquidation Occur?
Imagine you want to open a large trade, but you don’t have all the money. So, you borrow funds from the exchange. The money you personally put down referred to as your margin.
- Your margin is like a safety deposit.
- If your trade starts losing money, the losses calculated from your margin.
- The exchange sets a minimum margin level you must keep. This is the Maintenance Margin.
- If your losses eat up your margin and reach this minimum level, the exchange becomes concerned.
- To recover its borrowed money, it forces your trade to close. This is liquidation.
In short, liquidation is the platform’s way of saying, “You’ve lost too much of your deposit, so we’re ending this trade now.”
How Liquidation Works in One-Way Mode
One-Way Mode is the most basic style. You can only have one active trade per crypto—either a “long” (betting on price up) or a “short” (betting on price down).
Liquidation in One-Way Mode: All or Nothing
This Mode is simple, but also the most brutal. There is no backup plan.
- One Trade at a Time: You are fully committed to a single bet.
- No Backup: A market move against you leads straight to liquidation.
- Total Loss: Your entire position is closed if your margin falls below a certain level.
Example
- You use 10x leverage to buy 1 Bitcoin at $30,000.
- The price of Bitcoin crashes.
- Your losses grow so big that your margin can’t cover them.
- Result: Your entire 1 Bitcoin position liquidated. You lose the trade and your margin.
How Liquidation Works in Hedge Mode
Hedge Mode is for more advanced plays. It allows you to open both a long and a short position on the same cryptocurrency at the same time.
Liquidation in Hedge Mode: Double Trouble
You might think having opposite trades would protect you. But in Hedge Mode, each trade is judged on its own.
- Two Independent Trades:
Your long and short positions treated separately.
- Separate Liquidation Prices:
Each trade has its own “liquidation point” based on its entry price and margin.
- Both Can Be Liquidated:
In a wild market swing, both your long and short trades can liquidated simultaneously.
Example
- You have: Long 1 BTC (bought at $30,000) and Short 1 BTC (sold at $32,000).
- The market suddenly crashes to $27,000.
- Your Long position is losing a lot of money.
- Your Short position should be winning, but the extreme volatility triggers its liquidation too.
Result: Both your Long and Short positions can be forcibly closed.
How Liquidation Works in Multiple Mode
Multiple Mode is for strategists. You can open several different trades, each with its own settings, all at the same time.
Liquidation in Multiple Mode: Isolated and Safe
This is the safest Mode for managing risk. Each trade is in its own protective bubble.
- Separate Margins:
You decide how much margin to give to each trade.
- Isolated Risk:
If one trade goes bad, it doesn’t affect the others.
- Individual Liquidation:
Only the first successful trades continue to run; subsequent successful trades also continue to run.
Example
Trade A: Long 0.5 BTC with low 5x leverage. (Safer)
Trade B: Long 0.5 BTC with high 25x leverage. (Riskier)
- The Bitcoin price drops a little.
- The high-leverage Trade B gets liquidated because its losses amplified.
- Trade A, with its lower leverage, survives the dip.
Result: Only Trade B is closed. Trade A remains open and unaffected.
Final Words
Trading with leverage is not just about being right on the market’s direction. It’s about understanding the rules of the game. Crypto liquidation works differently in each Mode. One-Way Mode is a high-stakes, single bet. Hedge Mode offers flexibility but can still liquidate both sides. Multiple Mode on BTZO is the best for controlling risk and preventing a single bad trade from impacting your entire portfolio. Choose your Mode wisely to protect your capital and trade smarter.