Liquidations

How liquidations work on Wasabi, and how to manage your risk.

Wasabi uses an onchain liquidation engine to protect the protocol and its liquidity providers. If a position's losses approach the collateral backing it, the position is liquidated automatically. Understanding how this works helps you manage risk and size positions appropriately.

How Liquidations Work

Every open position has a liquidation price: The price at which your remaining collateral can no longer support the position. When the onchain price of the asset reaches your liquidation price, the position is closed automatically by the liquidation engine.

On Wasabi, liquidation is total. The entire remaining collateral is forfeited - there is no partial return. Liquidated collateral goes into an insurance fund that strengthens the protocol during periods of high volatility.

Liquidation Thresholds

Your liquidation threshold is based on the market's maximum leverage. The threshold is half of the initial margin at max leverage. For example, 5% (for 10x max leverage assets) and 16.7% (for 3x max leverage assets) depending on the asset.

What Moves Your Liquidation Price

Your liquidation price is not static. Two factors shift it over time:

• Interest Accrual: Borrow fees accrue continuously on your position. Depending on the market configuration, interest is either added to your principal (increasing leverage) or deducted from your collateral (reducing your buffer). Both move your liquidation price closer to the current market price over time.

• Market Conditions: Rapid price swings can push an asset's price through your liquidation level before a Stop Loss or Take Profit order triggers. TP/SL orders reduce risk but do not guarantee protection against liquidation.

How to Manage Liquidation Risk

• Add collateral. You can add collateral to an open position at any time. This also pays off all outstanding interest and resets the accrual clock, pushing your liquidation price further away.

• Set a Stop Loss. While not a guarantee in fast-moving markets, a Stop Loss closes your position before liquidation under normal conditions.

• Monitor your positions. Borrow fees accrue continuously. The longer a position is open, the closer your liquidation price gets. Check in regularly.