Look at the steepest red wicks on any Bitcoin futures chart, and most of the displacement on the way down came from forced closes, not from anyone deciding to sell. The exchange’s risk engine fires market orders into a thin…
Two traders open the same BTC position at the same moment. They use the same entry price, leverage, and direction. One exchange shows a liquidation price 1.8% closer to entry than the other. Neither exchange made an error. Different exchanges…
Mark price is the price the exchange uses to calculate unrealized profit and loss and decide when to liquidate a position. It is not the price shown on the chart. Crypto futures contracts display two numbers at all times: the…
When a leveraged position gets liquidated badly enough, the exchange is left with a loss it cannot recover from the losing trader. That loss has to go somewhere. Without an insurance fund, it goes to the winning side of the…
The liquidation price is the price at which a crypto futures exchange force-closes a leveraged position. It is calculated before the trade opens, using four variables: entry price, leverage, maintenance margin rate, and position size. When mark price reaches that…
Bankruptcy price is the mark price level at which a crypto futures position has consumed its entire initial margin, leaving account equity at exactly zero. It is not the price where a position closes. Positions close earlier, at the liquidation…
Auto-deleveraging (ADL) is a last-resort risk mechanism used by crypto futures exchanges to close profitable positions when the insurance fund cannot cover losses from a bankrupt account. It does not target the failing trader. It targets the trader on the…
Open interest in crypto futures is the total number of active leveraged contracts in the market at any given moment. When open interest is high, a forced-liquidation event can become significantly larger because more positions are exposed to forced closure…
A crypto futures contract runs on three separate price feeds: last price, index price, and mark price. Each one does a different job. Only one determines when a position is forcibly closed. Last price is what the chart shows. Index…
Contract size in crypto futures is the fixed quantity of the underlying asset controlled by a single contract. This number directly determines the notional value (contract size × price), which sets the margin required and the dollar impact of every…