Leverage (Perp Dex)

Borrowed capital used to amplify trading positions and potential returns.

What is Leverage (Perp Dex)?

Leverage in Perp DEXs allows traders to control larger positions in digital assets with a smaller amount of their own capital, borrowing the rest from the platform’s liquidity pool or protocol. For instance, with 10x leverage, a trader with $1,000 can control a $10,000 position. Platforms like GMX offer leverage up to 50x, though higher leverage increases liquidation risk if the market moves unfavorably.

Leverage is facilitated through smart contracts, with the borrowed funds often sourced from liquidity providers’ pooled assets. Traders must maintain sufficient margin to cover potential losses, and Perp DEXs enforce strict liquidation thresholds to protect the protocol. Leverage amplifies both profits and losses, making risk management critical.