Leverage Multiplier Constraints

Leverage multiplier constraints are the limits placed by exchanges on the amount of borrowed capital a trader can use. These limits are designed to prevent excessive risk-taking that could threaten the protocol's solvency.

Higher leverage increases the speed at which an account reaches the liquidation threshold. Exchanges often tier these limits based on position size, where larger positions are restricted to lower leverage.

This helps in managing the market impact of large liquidations. These constraints are a vital tool for balancing user access to capital with systemic risk protection.

They force traders to maintain a realistic view of their own risk tolerance.