Position Leverage Cap

A position leverage cap is the maximum amount of leverage allowed by a protocol for a specific asset or account. It limits the multiplier applied to the initial margin, effectively capping the maximum exposure a trader can take.

This limit is imposed to prevent excessive risk-taking and to protect the platform from systemic failures caused by highly leveraged bets. The cap is often determined by the liquidity and volatility of the underlying asset.

Lower caps are usually applied to more volatile or illiquid tokens. This mechanism is a key part of the platform's risk framework.

It helps ensure that market movements do not trigger mass liquidations.