Margin Call

Jul 21, 2026 | Updated Jul 21, 2026

A margin call is a request to add funds or reduce a leveraged position after the value of the collateral falls below a certain level.

What Is a Margin Call?

A margin call is a formal request from a broker or lender for a borrower to restore an account to the required maintenance level. This can be done by depositing cash, posting additional collateral, or reducing the size of the leveraged position. If the borrower does not meet the requirement, the lender may liquidate part or all of the collateral, sometimes with prior warning and sometimes without it.

The term comes from traditional securities markets, where traders using borrowed money had to keep their accounts above a minimum maintenance threshold. When the account fell below that threshold, the broker issued a call to fix the shortfall.

How Do Margin Calls Work in Crypto?

Crypto lending platforms use a similar framework, usually based on a loan-to-value ratio (LTV), which is the loan amount divided by the value of the collateral. A borrower who deposits $10,000 worth of bitcoin to secure a $5,000 loan starts at 50% LTV. If bitcoin’s price falls, the LTV rises, and the borrower’s safety buffer shrinks.

Many platforms set a margin call threshold below a separate liquidation threshold. When the LTV reaches the margin call level, the borrower may receive a warning to add collateral or reduce the loan. If the borrower does not act and the LTV reaches the liquidation threshold, the platform may liquidate part of the collateral according to its rules.

The exact process varies by platform: some centralized services give borrowers a response window, while others liquidate automatically and quickly. Decentralized protocols typically enforce liquidation through smart contracts, which reduces human discretion but introduces risks such as oracle failures or contract bugs.

Margin Calls and Custody Risk

A margin call means collateral is already exposed to the lender’s risk controls. On a centralized platform, the platform controls liquidation. On a decentralized protocol, the smart contract does. Regardless of the platform, once assets are posted as collateral, they are no longer under direct self-custody in the ordinary sense.