How does liquidation work ?

Important: Margin trading is only offered to institutional customers with trading accounts.

Warning: Margin trading is a high risk activity. Please read carefully the Risk Warnings and Terms for Margin Services on bullish.com.

Liquidation refers to the process of partially or fully selling off assets in your account to decrease the borrowed amount when the account’s leverage exceeds a certain threshold. In Bullish margin trading, you can use your available assets in the trading account as collateral to borrow additional funds to trade. When the value of the collateral decreases significantly or the value of your borrowed assets increases significantly, your collateral may no longer be sufficient to cover the borrowed amount. To prevent default and minimize risk for lenders, our Liquidation Engine will perform liquidation according to the trading account’s Health Indicators.

Health Indicators

Bullish Liquidation protocols are initiated based on the current leverage. These value determines the Health Indicator for the trading account.

Health Indicator	Healthy	Healthy	Monitor	Caution	Danger	Critical	Suspended
Borrow?	✅	✅	❌	❌	❌	❌	❌
Leverage range	No leverage (1x)	> 1x and < 3x	≥ 3x and < 5x	≥ 5x and < 6x	≥ 6x and < 12x	≥ 12x and <30x	≥ 30x
Trade to increase leverage?	✅	✅	❌	❌	❌	❌	❌
Trade to decrease leverage?	✅	✅	✅	✅	❌	❌	❌
Cancel orders?	✅	✅	✅	✅	❌	❌	❌
Withdraw?	✅	✅	❌	❌	❌	❌	❌
Create AMM Instruction?	✅	❌	❌	❌	❌	❌	❌
Transfer out?	✅	✅	❌	❌	❌	❌	❌

Liquidation Engine

Depending on the health state at the time of evaluation, and roughly every 30 seconds while in the given state, the following actions will occur:

Health Level- Danger

When your account is in health level “Danger” then the liquidation engine will cancel all open limit orders on your behalf and start to initiate partial liquidation, in a best-effort basis to reduce leverage by selling some collateral if necessary and partially repaying debts.

Note that all liquidation orders charge an additional 50bps fee if filled.

Health Level- Critical

When your account is in health level “Critical” then the liquidation engine will cancel all open limit orders on your behalf and start to initiate full liquidation, in a best-effort basis to repay all debts, potentially selling all collateral if necessary.

Note that all liquidation orders charge an additional 50bps fee if filled.

Health Level- Suspended

When your account is in health level “Suspended” then the account is considered to have defaulted.

Viewing the Current Leverage

To view your Current Leverage from your account:

Go to the left-hand navigation and choose Portfolio.
Choose Borrowing.
View your Current Leverage and Current LTV under the Borrowing tab.

You can also view your Current Leverage in Overview

Go to the left-hand navigation and choose Portfolio.
Choose Overview.
View your Current Leverage.

Or view your Current Leverage in Margin Panel:

Go to the left-hand navigation and choose Trade.
View your Current Leverage at the Margin Panel.

Liquidation Price

The liquidation price can help you assess your risk due to the use of leverage. It indicates the price level at which we anticipate you may lose control of your account.

Specifically, the liquidation price (expressed in US dollars) is calculated based on the customer's assets and liabilities, using the Health: Danger leverage threshold. We simplify the calculation by assuming that when the price of debt assets fluctuates, the price of collateral assets remains unchanged, and vice versa, and assuming perfect correlation, so that all prices change by the same ratio.

Viewing liquidation price

To view your liquidation price

Go to the left-hand navigation and choose Portfolio.
Choose Borrowing.
View details of Liquidation Price under the Asset Details table.