Liquidation Bonus

When dealing with Liquidation Bonus, a reward or fee reduction offered by an exchange when a position is forcibly closed. Also known as forced‑sale incentive, it aims to offset some of the costs traders face during a rapid market drop. Understanding this concept helps you see why exchanges like Cryptex or Bexplus mention it in their risk‑engine policies.

Key Concepts Behind Liquidation Bonuses

The Liquidation, the process where an exchange automatically sells a leveraged position to cover borrowed funds is the trigger for the bonus. Margin Trading, borrowing assets to increase position size creates the risk that forces a liquidation. To protect both the platform and the trader, the exchange may offer a liquidation bonus that reduces the penalty fee or returns a small portion of the collateral.

Collateral itself is the safety net. When you open a leveraged trade, you lock up an amount of crypto as collateral. If the market moves against you, the exchange taps this collateral to cover losses. Some platforms structure the bonus as a partial return of that collateral, especially when the liquidation happens during high‑volume bursts when slippage would otherwise be costly. Leverage, the multiplier applied to your borrowed funds, directly influences the size of both the potential profit and the liquidation risk. Higher leverage means a tighter margin, so bonuses become a way for exchanges to encourage responsible use of leverage while still attracting high‑volume traders.

These three entities—liquidation, margin trading, and collateral—form a triangle that determines when a liquidation bonus is relevant. In practice, a trader on a high‑leverage futures market might see a 5% fee rebate after a forced sell, while a DeFi platform that uses automated market makers could distribute the bonus as native tokens. Below, you’ll find reviews of exchanges that talk about their bonus policies, guides on how airdrops reward liquidators, and deep dives into stablecoins that often act as collateral in liquidations. This collection gives you a practical look at how liquidation bonuses shape risk management across the crypto ecosystem.