Topics
    LTV and Liquidation (Spot Margin Trading)
    bybit2024-01-18 15:01:51

    Spot Margin trading increases purchasing power and allows you to access more funds to leverage your positions. It offers greater profit potential than traditional Spot trading, but also greater risks.



    For Spot Margin Trading under Standard Account, Bybit uses the LT (Loan-to-Value) ratio to assess the risk of your Spot Account. The LTV refers to the ratio of your borrowings to the value of your margin assets. When the LTV reaches 95%, liquidation will be triggered. Liquidation in Spot Margin TradVing means that the system will liquidate your margin assets by selling them into the borrowed assets and performing auto repayment. 



    Please note that the LTV risk measurement method is not applicable for Spot Margin Trading under Unified Trading Accounts (UTA). In UTA, Bybit uses the Account’s Maintenance Margin Rate (MMR) to assess the risk. To learn more about the liquidation and repayment process, please refer to Trading Rules: Liquidation Process (Unified Trading Account).



    In this article, we will focus on LTV calculation and the liquidation process for Spot Margin Trading under Standard Accounts. 



    To view the LTV of your Spot Account, please head to AssetsSpot Account.

     





    Formula

    LTV =  Total Liability / Margin Balance × 100% 

     

    — Total Liability = (Outstanding Principal + Outstanding Interest) x Last Traded Price

     

    — Margin Balance = (Available Margin Assets × Last Traded Price × Conversion Ratio)+ [Frozen Amount × Last Traded Price × Min (Conversion Ratio of Base Token, Conversion Ratio of Quoted Token)]

    • Frozen Amount includes assets occupied by Limit Orders and TP/SL Orders. You can view the amount frozen for the orders from Current Orders page.

     

    — Margin Utilized = (Total Liability × Last Traded Price) / (Leverage - 1)

     

    — Available Margin = Margin Balance - Total Liability - Margin Utilized

     

    — For the supported margin assets, please refer to Margin Data



    The three risk parameters are as follows:

    Transfer Out Ratio

    Risk Alert Ratio

    Liquidation Ratio

    LTV

    ≥ 60%

    ≥ 92%

    ≥ 95%

    Note:

    — LTV will be calculated in real-time.




    Transfer Out Ratio: When the LTV of your Spot Account is lower than 60%, you can transfer margin assets from your Spot Account. The lower the LTV, the greater the proportion of margin assets that can be transferred out. If you‘d like to transfer all of your margin assets out, please check your total liability and repay all of your borrowed amounts first.

     

    Withdrawal and transfer out of margin assets will be restricted when the LTV is ≥ 60%. 

     

    Note: Non-margin assets can be transferred out at any time, and won’t be affected by the transfer-out ratio.




    Risk Alert Ratio: When the LTV of your Spot Account is ≥  92%, a risk alert will be triggered, and you’ll receive an SMS and email notification to inform you to add more collateral (transfer in more collateral assets) to avoid liquidation. 

     

    Note: 

    — It is strongly recommended for users to continue monitoring their account in case of risk alert delay or glitch. Bybit will not be held responsible for liquidations resulting directly or indirectly from this alert feature’s malfunction.

    — Due to the application of the conversion ratio, Spot Trading will be restricted if the system detects there is liquidation risk in the event that traders use the margin asset with a higher conversion ratio to buy or sell it into a margin asset with a lower conversion ratio. 





    Liquidation Process

     

    Liquidation Ratio: When the LTV hits 95%, liquidation is triggered. The liquidation process is as follows:

     

    1. You’ll receive the liquidation notification by SMS and email

     

    2. Interest calculation ceases immediately

     

    3. The following features (in addition, possibly, to others) will be restricted:

    • Withdrawals and trades on the Spot platform

    • Funds transfer from your Spot Account

    • Turning off margin

    • Launchpad, NFT trades and Institutional lending

     

    4. Once liquidation is triggered, the system will take over all margin assets in your Spot Account and repay the borrowed amount, a 2% liquidation fee will be charged.

    After completing the above-forced liquidation procedure. Your borrowed amount will be repaid in full, and your LTV will be reduced to 0%.

     

    Let’s take borrowing BTC as an example, and assume that Trader A's Spot Account has BTC assets.

     

    When the liquidation is triggered, the system will automatically repay the BTC in Trader A’s Spot Account. If it isn’t enough to pay back the loan, all margin assets that Trader A holds in their Spot Account will be traded in BTC at market price to repay borrowing until the LTV reaches 0%. Please note that non-margined assets are not affected.





    Outstanding Balance

     

    After the loan has been repaid in all available margin currencies, if there are outstanding balances and you have insufficient margin assets in the spot account to repay the debt, the system will use the Margin Insurance Fund to repay the outstanding balances. The margin insurance fund is designed to cover the outstanding balance when the user's position is liquidated.


     

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