What is the formula for perpetual futures liquidation price?

For a Long position: Liquidation Price = (Entry Price * Quantity - Margin + Cum Maintenance) / (Quantity * (1 - Maintenance Margin Rate)). For a Short position: Liquidation Price = (Entry Price * Quantity + Margin - Cum Maintenance) / (Quantity * (1 + Maintenance Margin Rate)).

What is the difference between bankruptcy price and liquidation price?

The bankruptcy price is the price where position loss equals 100% of your allocated collateral (margin balance is zero). The liquidation price is reached before bankruptcy, triggering forced liquidation when remaining margin falls to the required Maintenance Margin Rate.

How does Cross Margin affect liquidation risk?

Cross Margin shares all available account equity across open positions. This moves the liquidation price further away from your entry price compared to Isolated Margin, but puts your entire wallet balance at risk if the market moves decisively against your position.

Perpetual Futures Liquidation Price Calculator

1. The Mechanics of Perpetual Liquidation

In cryptocurrency perpetual contracts, liquidation occurs when the margin balance of a position drops below the required Maintenance Margin. Unlike traditional futures that expire monthly or quarterly, perpetual swaps have no delivery date and rely on the funding rate mechanism to stay anchored to the spot index price.

Exchanges utilize the Mark Price rather than the Last Traded Price to trigger liquidations. This prevents predatory market actors from triggering cascade liquidations via momentary order book wicks or short-term exchange manipulation.

2. Mathematical Formulas (Binance & Bybit Standard)

Formulas derived directly from the Binance Futures and Bybit Derivatives technical specifications:

Long Position Formula

P_liq = (P_entry * Q - Margin + Cum) / (Q * (1 - MMR))

Where Q is contract size in coins, MMR is tier rate, and Cum is the cumulative deduction amount.

Short Position Formula

P_liq = (P_entry * Q + Margin - Cum) / (Q * (1 + MMR))

Where Q is contract size in coins, MMR is tier rate, and Cum is the cumulative deduction amount.

3. Real-World Case Study: 20x BTC/USDT Long

Consider an isolated trader entering a 1.0 BTC Long at $65,000 using 20x leverage:

Position Notional = $65,000.00 USDT
Allocated Initial Margin = $65,000 / 20 = $3,250.00 USDT
BTCUSDT Bracket: Tier 2 (Notional between $50k and $250k)
Maintenance Margin Rate (MMR) = 0.50% (0.005)
Cumulative Maintenance Amount (Cum) = $50.00 USDT

Applying the Long Liquidation Formula:

P_liq = (65,000 - 3,250 + 50) / (1.0 * (1 - 0.005)) = 61,800 / 0.995 = $62,110.55 USDT

The position will be liquidated if Bitcoin mark price drops by $2,889.45 (-4.45%) from entry.

4. Frequently Asked Questions

Why does my liquidation price change when I adjust position size?

Exchanges utilize tiered leverage brackets. As your position notional value increases, the exchange automatically places you in a higher tier with a higher Maintenance Margin Rate (MMR) and lower maximum allowable leverage, shifting your liquidation price closer to your entry.

What is the Insurance Fund?

The Insurance Fund absorbs bankrupt positions when the market gaps past the bankruptcy price and fills at a price worse than zero equity. If the insurance fund is depleted during severe liquidity crises, Auto-Deleveraging (ADL) is invoked to close profitable opposing positions.