1. What is the Bankruptcy Price?
The Bankruptcy Price is the theoretical price level at which all margins allocated to a position have been exhausted. When the Mark Price reaches this level, the position's margin can no longer cover its losses, and account equity would theoretically fall to zero.
Simply put, the Bankruptcy Price represents the theoretical boundary where the entire position margin has been used to absorb losses.
Please note:
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To prevent an account from falling into negative equity, the system typically triggers liquidation when the Mark Price reaches the liquidation price, before it reaches the Bankruptcy Price.
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The Bankruptcy Price does not represent the actual liquidation execution price. The actual liquidation price may differ due to market conditions, liquidity, slippage, and other factors.
2. What is the Bankruptcy Price used for?
The Bankruptcy Price is primarily used in liquidation processing and risk management. It serves as a reference for liquidation orders and price protection mechanisms.
2.1 Liquidation order price
When a position is liquidated, the system places a liquidation order at the Bankruptcy Price. This price is used as the order price for the liquidation process and settlement.
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If the actual liquidation execution price is better than the Bankruptcy Price, any remaining funds after liquidation will be added to the Insurance Fund.
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If the position cannot be closed at a price better than the Bankruptcy Price, the resulting shortfall will be covered by the Insurance Fund.
Please note that the Bankruptcy Price is a theoretical price calculated by the system and does not necessarily equal the actual execution price. The final execution price depends on real-time market conditions and available liquidity.
2.2 Price protection for user-initiated closing orders
When a user manually closes a position, particularly with a market order, the system applies price protection based on the Bankruptcy Price. This helps prevent extreme market conditions or insufficient liquidity from causing the execution price to deviate significantly and potentially resulting in negative account equity.
For example, assume a user holds a BTCUSDT perpetual futures long position with a Bankruptcy Price of 80,000 USDT. A closing sell order at a price below the Bankruptcy Price, such as 79,500 USDT, will be canceled by the system.
3. How is the Bankruptcy Price calculated?
The Bankruptcy Price calculation depends on the margin mode. For Isolated Margin, the calculation is based on the margin allocated to the current position. For Cross Margin, the calculation is based on the overall account risk and the liquidation price of the relevant position.
3.1 Isolated Margin mode
Under Isolated Margin Mode, each position uses its own independent position margin. Margin from other positions and the remaining balance in the account are not used to cover losses on that position.
Bankruptcy Price for a Long Position:
Bankruptcy Price = Entry Price − Position Margin ÷ Position Size
Bankruptcy Price for a Short Position:
Bankruptcy Price = Entry Price + Position Margin ÷ Position Size
Example
Suppose a user holds a BTCUSDT Perpetual position with:
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Entry Price: 80,000 USDT
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Position Size: 1 BTC
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Position Margin: 1,000 USDT
For a long position:
80,000 − 1,000 ÷ 1 = 79,000 USDT
For a short position:
80,000 + 1,000 ÷ 1 = 81,000 USDT
Adding margin to an isolated position will lower the Bankruptcy Price for a long position and raise it for a short position. In other words, the Bankruptcy Price moves farther away from the Entry Price, allowing the position to withstand a larger adverse price movement.
3.2 Cross Margin mode
Under Cross Margin mode, all cross-margin positions share the account's available margin. The system considers the account's available margin, unrealized P&L from other positions, current positions, maintenance margin requirements, and other relevant factors.
The system first calculates the liquidation price for the relevant position and then determines the Bankruptcy Price.
Bankruptcy Price for a Long Position:
Bankruptcy Price = Liquidation Price − Entry Price × Maintenance Margin Rate
Bankruptcy Price for a Short Position:
Bankruptcy Price = Liquidation Price + Entry Price × Maintenance Margin Rate
Example
Suppose a BTCUSDT Perpetual position has:
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Entry Price: 80,000 USDT
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Maintenance Margin Rate: 0.5%
For a long position, if the liquidation price is 79,400 USDT:
79,400 − 80,000 × 0.5% = 79,000 USDT
For a short position, if the liquidation price is 80,600 USDT:
80,600 + 80,000 × 0.5% = 81,000 USDT
Under Cross Margin mode, the liquidation price and Bankruptcy Price may change when the account balance, P&L from other positions, open orders, or position size changes.
Therefore, the Bankruptcy Price displayed for a cross-margin position is a reference value calculated based on the current account status. Actual liquidation is determined by the overall risk level of the account.
FAQ
1. What is the difference between the Bankruptcy Price and the liquidation price?
The liquidation price is the price at which the system triggers forced liquidation. The Bankruptcy Price is the theoretical price at which the position's margin would be fully exhausted.
The system typically triggers liquidation before the Mark Price reaches the Bankruptcy Price.
2. Is the Bankruptcy Price the actual liquidation execution price?
No. The Bankruptcy Price is a theoretical price used for liquidation processing and risk management.
The actual execution price may differ from the Bankruptcy Price due to market conditions, liquidity, slippage, and other factors.
3. Why does the Bankruptcy Price change under Cross Margin mode?
Under Cross Margin Mode, positions share the account's available margin. Changes in the account balance, PnL from other positions, open orders, or position size may affect the Liquidation Price and Bankruptcy Price.
4. Does adding margin affect the Bankruptcy Price?
Yes. Adding margin to an isolated position lowers the Bankruptcy Price for a long position and raises it for a short position. This allows the position to withstand a larger adverse price movement.
5. Can I use the Bankruptcy Price as my SL price?
It is not recommended.
The Bankruptcy Price represents the theoretical risk boundary where the position's margin would be fully exhausted. Set leverage and SL levels according to your risk tolerance, and monitor your positions and account risk closely.
Risk Warning
The Bankruptcy Price is for theoretical reference only. It does not represent the actual execution price and should not be used as SL price. The calculated Bankruptcy Price may vary depending on the margin mode, account balance, position size, and other factors.
Please choose an appropriate leverage level and margin mode based on your risk tolerance, and monitor your positions and account risk closely. For the actual Bankruptcy Price calculation and liquidation process, please refer to the information displayed on the trading page and the platform's applicable rules.
