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2023-12-04 12:09:36
Bybit uses the Dual-Price mechanism to prevent traders from falling victim to market manipulations.
Due to market manipulations, the market price on a futures exchange may deviate significantly from the Spot price, resulting in a mass liquidation of traders’ positions. In addition to costing traders large amounts of their hard-earned money, market manipulations also destroy the general public’s confidence in the entire crypto exchange industry. Bybit’s top priority is to provide a fair trading environment to all traders, which is why we employ a Dual-Price mechanism to prevent market manipulations.
The Dual-Price Mechanism consists of Mark Price & Last Traded Price.
Mark Price
For perpetual contracts, the Mark Price refers to a global Spot price index plus a decaying funding basis rate. Mark Price can be considered to reflect the real-time Spot price on the major exchanges. Bybit uses Mark Price as a trigger for liquidation and to measure unrealized profit and loss, but this doesn’t affect a trader’s actual profit & loss. Only when the Mark Price reaches a trader’s liquidation price, the trader’s position will be liquidated.
Calculation of Mark Price
Mark Price = Median (Price 1, Price 2, Last Traded Price)
Price 1 = Index Price × [1 + Last Funding Rate × (Time Until Funding /8)]
Price 2 = Index Price + Moving Average (5-minute Basis)
- Moving Average (5-minute Basis) = Moving Average [(Bid1 + Ask1)/2 − Index Price], which measures every second in a 5-minute interval.
In the following scenarios, Bybit will adjust the criteria for selecting the mark price to be used for calculation:
- If the index price of any Spot exchange is abnormal or data cannot be obtained, the mark price will be calculated based on the last traded price on the Bybit platform.
- Due to factors such as index price distortion, there is insufficient data to calculate the 5-minute moving average. In this scenario, the mark price will be calculated by Bybit's last traded price.
Notes:
— Bybit will use the optimal mark price to reduce the risk of traders' positions being liquidated in volatile markets.
— Bybit reserves the right to update the mark price selection criteria in real-time according to market conditions without prior notice.
— The calculation above is applicable to Mark Price under Perpetual Contract Trading. For the Mark Price calculation in Futures Contract Trading, please refer to here.
— To understand how to check the Mark Price from our chart, please visit the guide here.
Last Traded Price
The Last Traded Price is Bybit's current market price, which is always anchored to the Spot price using the funding mechanism. This is why the price on Bybit is unlikely to deviate significantly from the Spot market price.
In summary, the Dual-Price Mechanism minimizes the price discrepancy and ensures a fairer trading environment, as well as protecting traders from malicious liquidation.
Note: In a fluctuating market, the Last Traded Price on Bybit may temporarily deviate from the Mark Price. This may cause an immediate unrealized profit or loss right after order execution. Kindly note that this is not a real profit or loss, but please be reminded to keep an eye on the distance between Liquidation Price and Mark Price.
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