How does mark price affect the liquidation process in cryptocurrency futures trading?

3 answers

• bombaNov 17, 2020 · 5 years ago
  The mark price plays a crucial role in the liquidation process of cryptocurrency futures trading. It is the reference price used to determine whether a trader's position should be liquidated. When the mark price falls below a certain threshold, known as the liquidation price, the trader's position is automatically closed to prevent further losses. The mark price is calculated based on various factors, including the spot price of the underlying asset, funding rates, and market volatility. It ensures that the liquidation process is fair and transparent, protecting both traders and the exchange from extreme price fluctuations.
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• Jackeyy3Jun 21, 2024 · a year ago
  In cryptocurrency futures trading, the mark price is used to determine the value of a trader's position. When the mark price deviates significantly from the spot price, it can trigger liquidation events. This is because the mark price reflects the current market conditions more accurately than the spot price, which can be subject to manipulation or illiquidity. By using the mark price, exchanges can ensure that traders' positions are liquidated at a fair price, minimizing the risk of market manipulation and protecting the integrity of the futures market.
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• Re solutionsAug 15, 2024 · a year ago
  The mark price is an important component of the liquidation process in cryptocurrency futures trading. It is calculated based on the average price of the underlying asset across multiple exchanges to ensure accuracy and fairness. When the mark price falls below the liquidation price, the trader's position is liquidated. This mechanism helps prevent traders from taking excessive risks and protects the exchange from potential losses. At BYDFi, we use a robust mark price calculation methodology that takes into account the liquidity and trading volume of different exchanges to provide a reliable reference price for liquidation.
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