Bybit claims to be the fastest-growing cryptocurrency exchange today with over 6 million registered users. The website allows users to buy, sell and trade popular coins on their Spot and Derivatives platforms. It also focuses on margin trading, offering up to 100x leverage on BTC/USD and ETH/USD trading pairs.
Bybit was established in Singapore in March 2018 and is made up of experts from the investment banking, technology, and currency sectors as well as early blockchain users. It is a registered trading exchange in the British Virgin Islands, and is still growing in number of users.
The exchange offers a fully-featured platform with spot trading, derivatives trading, and margin trading with up to 100x leverage to satisfy the needs of the most discerning cryptocurrency trader. Although packed with features and very detailed, the advanced charting interface is simple to use. Bybit offers the critical option of taking profit/stop-loss orders, which is not available on all margin trading platforms but is crucial for reducing losses. If you’re serious about margin trading, Bybit is undoubtedly a crypto exchange to take into account.
Leverage Trading in Cryptocurrency
Leverage in cryptocurrency trading refers to placing trades with borrowed funds. Trading using leverage can increase your buying or selling power and enable you to transact larger sums. As a result, you can conduct leveraged trades even with a modest amount of beginning cash by using it as collateral. Leveraged trading can increase your potential gains, but it also carries a high risk, particularly in the erratic cryptocurrency market. Use caution when trading cryptocurrencies with leverage. If the market moves against your position, it may result in large losses.
The trader’s purchasing or selling power is increased, allowing them to transact with more money than they presently have in their wallet. They could be able to borrow up to 100 times their account balance depending on the cryptocurrency exchange they use to trade.
A ratio is used to describe the amount of leverage, such as 1:5 (5x), 1:10 (10x), or 1:20. (20x). It displays the multiplicity of your starting capital. Consider opening a $1,000 bitcoin position with $100 in your exchange account as an illustration (BTC). Your $100 will have the same purchasing power as $1,000 with a 10x leverage.
Overview of Margin Trading in Bybit.
Trading using leverage enables a trader to open long and short positions and to go long or short beyond his available funds. If a trader uses more than 1x leverage, both profit and loss will be accelerated. Margin is the amount of money needed to open a leveraged position.
Leverage and Margin
Initial & Maintenance Margin
Initial Margin is the initial margin needed to open a trade, which is based on leverage and position size. The phrase “maintenance margin” refers to the minimal sum necessary to maintain a leveraged position and establishes the precise price at which a position will be liquidated.
Initial Margin (IM)
- IM Requirement for Buy/Long Orders: [Contract Value*Min (Buy/Long Limit Order Price, Best Ask Price)]/Leverage. Order will have a 0.060 percent two-way taker fee (fee to open + fee to close). The nature of the order and the execution price will be used to determine how much the actual trading fees will be.
- IM requirement for sell/short orders: [Contract value*Max (Sell/Short limit order, best bid price)/Leverage]. Order will have a 0.060 percent two-way taker fee (fee to open + fee to close). The nature of the order and the execution price will be used to determine how much the actual trading fees will be.
- No IM will be posted if an order does not expand the size of the current position.
- The system will use Max [Buy order IM (X), Sell order IM (Y)] as the account IM if a trader holds Buy and Sell positions or orders simultaneously. If X = 200 and Y = 150, the account IM will be 200. There is no need for additional margin if the trader places a second sell order with an order cost of less than $50. It will, however, take an additional 20 margin (220-200) to place the additional sell order if the cost of the additional sell order is 70, resulting in Y=220.
Maintenance Margin (MM)
The maintenance margin rate (MMR) of the position is used to determine maintenance margin (MM). As the margin tier rises, the MMR of each position also rises.
The required maintenance margin for all positions is equal to MMR * Contract value at the open position price. The required maintenance margin will also include the taker fee for closing the deal. This is the bare minimum margin needed to keep a position open. The position will be liquidated if the margin available in it is less than the maintenance margin.
Isolated Margin & Cross Margin
On Bybit, traders have the option of using cross margin or isolated margin method.
Cross Margin
To avoid liquidation, the entire available margin of the relevant asset type may be pulled.
Isolated Margin
The original margin and extra margin are the position’s maximum loss in isolated margin mode (if any). No further margin will be drawn to the position in the event that the position is liquidated. Traders can manually add more margin to a single position, which lowers the effective leverage and raises the price at which the position is liquidated. All previously posted additional margin will be reset to zero once position leverage has been changed.
Setting & Adjusting Isolated Margin
Cross margin mode is enabled by default. Traders can select their preferred leverage and switch to isolated margin mode. The lower the margin needed for this position, the higher the leverage.
Liquidation Process
To prevent liquidations brought on either insufficient liquidity or market manipulation, Bybit implements fair price marking.
Traders may increase the risk limit to a higher tier in order to open a larger position. Higher margin is needed for a higher risk limit.
Bybit employs partial liquidation to lower the necessary maintenance margin when liquidation occurs in order to prevent full liquidation. The liquidation procedure is as follows.
Traders under the lowest risk limit
- This contract’s active orders will all be canceled;
- The position will be closed at the bankruptcy price by the liquidation engine if it still doesn’t fulfill the maintenance margin criteria.
Traders under second or higher risk limit
The liquidation engine will make an effort to reduce the trader’s risk tolerance level in an effort to reduce the margin requirement:
- Maintain the current position and open orders, and if at all possible, minimize the trader’s direct risk limit;
- Reduce the risk limit by canceling all active orders while keeping the current position;
- Submit a FillOrKill order with the difference between the value of the current position and the risk limit value to meet the margin requirement and stop further liquidation;
- All positions must be acquired by the liquidation engine at the bankruptcy price if the position is still under liquidation.
Insurance Fund
The remaining margin will be contributed to Bybit’s insurance fund if it can close the liquidated position for more money than the bankruptcy price.
Bybit will draw on the insurance fund to cover the loss if it is unable to liquidate the position at a price higher than the bankruptcy price. ADL will be activated if the insurance fund is insufficient to cover the loss.
Bybit uses the insurance fund to stop traders from automatically deleveraging their positions.
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Bybit is a great platform for seasoned cryptocurrency traders seeking for an exchange with more advanced features. There are many user-friendly exchanges with straightforward interfaces available right now to help new investors get started in the cryptocurrency market, but such are typically not suitable for serious traders.
