Liquidation Price (Liquidity Mining)

Liquidation Price (Liquidity Mining)

Liquidation price is only applicable if you've added leverage that's higher than 1x. Your positions will be liquidated if the index price hits the liquidation price.

For liquidity providers, the exact liquidation prices are derived when their product plans start, approximately five minutes after each order is successfully submitted. You can view the liquidation price under My Liquidity.

Liquidation Price Calculation

Suppose Trader A adds the following liquidity to a pool:

Liquidity Pool: ETH/USDT

Principal: 6,000 USDT

Leverage: 2

Index price: 3,000 USDT = 1 ETH

Trader's liquidity: 12,000 USDT

Formula

Liquidation Price = 1.05 × Index Price × [(Trader’s Liquidity − Principal)/Trader’s Liquidity]²

In this case, the liquidation price is 787.5 USDT, based on the following calculation:

1.05 × 3,000 × [(12,000 − 6,000)/12,000]²

Please note that all principal investment could be lost if the positions are liquidated. You may add more USDT to reduce your leverage and minimize liquidation risks.

Note: Taking 2x leverage as an example, the liquidation price in Liquidity Mining is 1/4 of the entry price, while the Derivatives Contract is 1/2 of the entry price. Therefore, the risk of Liquidity Mining is lower than that of Derivatives Contracts.

How to reduce leverage

Step 1: Head to My Liquidity page, and click on More –> Reduce Leverage to enter the Reduce Leverage page.

Step 2: Select the liquidity pool you want to reduce leverage, and enter the amount.

Step 3: Please note your new liquidation price, and then click on Confirm.

The added USDT does not enter the liquidity pool, but simply repays the loan portion.

This means that the principal invested by traders will increase, while the trader's liquidity will remain unchanged.

Please note that the maximum USDT amount you can add is the part of the leveraged loan. When you add the maximum amount, the leverage of your position will be reduced to 1x.