What happens when you get liquidated

When mark-based equity falls below maintenance margin, the venue's liquidation engine closes your position — usually at market, often via reduce-only orders into the book. You lose control of the position immediately; remaining margin after the close may be returned or partially consumed by slippage. There is no grace period on most crypto venues.

The exchange matches your forced close against other traders or internal liquidity. Proceeds first cover your loss; any excess may return to you. If the close fills worse than your bankruptcy price, the shortfall hits the venue's insurance fund or, in extreme cases, counterparty mechanisms like ADL — not a "winner takes your stack" transfer to one trader.

It is a pool funded by liquidation fees and residual balances to absorb losses when liquidations cannot cover deficits — when mark moves so fast that the engine closes below bankruptcy. It protects the platform from negative balances; it is not deposit insurance for your trading P&L.

Auto-deleveraging forcibly closes profitable offsetting positions when the insurance fund cannot cover shortfalls — typically after extreme moves and crowded one-sided books. It is rare on deep markets but real in cascades. Socialized loss mechanisms spread residual pain when even ADL is insufficient.