Because you're borrowing crypto from Coinmerce, we need to make sure you can always pay it back. The Position Risk Ratio is how we monitor that — and liquidation is what happens when the math no longer works in your favour.
What is the Position Risk Ratio?
The Position Risk Ratio is a live indicator showing whether your collateral is sufficient to cover the cost of buying back the borrowed crypto.
Think of it as a fuel gauge:
Healthy (high ratio) — plenty of collateral cushion
Warning (medium) — adverse price moves are eating into your buffer
Critical (low) — you're approaching automatic liquidation
The ratio updates in real time as the asset's price changes. You can find it in your Margin Account alongside your Estimated P&L.
What triggers liquidation?
Liquidation happens when the Position Risk Ratio drops below a critical threshold. Concretely, this means the buyback cost has risen close to the total value held in your Margin Account.
In a 1× short, this requires a substantial adverse move — but "substantial" doesn't mean impossible, especially in volatile crypto markets.
Example
You deposit €1,000 collateral and short €1,000 of an asset. Your Margin Account holds €2,000 total (collateral + sale proceeds).
A 10% adverse move → buyback costs €1,100. Margin Account at €900. Risk Ratio is reduced but liquidation has not triggered.
A 30% adverse move → buyback costs €1,300. Margin Account at €700. Risk Ratio is in the warning zone.
A large adverse move approaching the threshold → liquidation triggers automatically before the buyback cost can fully consume your Margin Account.
The exact liquidation threshold is shown in your Margin Account interface and on the trade confirmation screen.
What happens during liquidation?
When the threshold is breached:
The system automatically buys back the borrowed crypto at the current market price
Your position is closed
The liquidation fee is applied
Any remaining balance is returned to your main account
In severe cases (gap moves), the remaining balance may be zero
Why notifications aren't enough
Coinmerce attempts to send a push notification when your Risk Ratio enters a high-risk zone — but you should not rely on these.
Crypto markets move fast, especially during news events
Push notifications can be delayed by your device, network, or OS settings
Notifications can fail silently
A "short squeeze" can cover the entire risk band in seconds
⚠️ You are solely responsible for monitoring your position. Treat notifications as a courtesy, not a safety system.
How to reduce liquidation risk
You have several tools to manage risk:
1. Use modest position sizes
Smaller positions relative to your conviction give you room to be wrong temporarily. A €500 short with a clear thesis is often safer than a €5,000 short on the same view — the smaller trade gives the price more room to wobble before liquidation becomes a risk.
2. Close before risk gets critical
If your Risk Ratio enters the warning zone, consider closing rather than waiting for it to recover. A small voluntary loss is better than full liquidation plus the liquidation fee.
3. Watch the calendar
Major events that move markets — Fed decisions, ETF approvals, exchange listings, regulatory announcements — can cause rapid price moves. Consider closing or sizing down before known catalysts.
4. Monitor actively
If you have an open position, check it regularly. Spot Margin is not a "set and forget" product. If you can't monitor for a stretch of time (long flight, holiday with no signal), close the position first.
Short squeeze risk
A short squeeze is a rapid upward price move driven, in part, by short sellers being forced to buy back the asset to close their positions. Each forced buyback adds buying pressure, pushing the price higher and triggering more liquidations — a feedback loop that can cover an entire risk band in minutes.
This is the single biggest risk in short selling. Be especially cautious with:
Assets with low liquidity or thin order books
Assets in active news cycles or social-media-driven momentum
Positions held over weekends or holidays when liquidity thins
What you cannot lose
The one piece of good news: your loss is capped at your collateral. Unlike some leveraged products, Coinmerce's Spot Margin will never put you in a negative balance or leave you owing Coinmerce money. The 1× structure and full isolation guarantee that.