Bitfinex margin trading

Exchange Bitfinex has developed the marginal financing feature. This tool allows clients to trade with 10x leverage. By opening margin positions, they can apply for funding themselves by specifying the amount, rate and term. Also the system crypto exchanges can automatically select a trader who is ready to provide his assets at the most favorable rate at the moment. Trading with leverage on the website bitfinex.com only users who have been verified to the “Intermediate” verification level or higher can do this.

Several concepts are used in margin trading. The first of them is the initial amount of funds. This is the amount that the trader can put out of his personal funds. The size of such volume differs depending on the pair selected for trading. Thus, the size of the volume required for BTC/USD, is 10% of the open offer price. For ETH/USD such a requirement reaches 20%.

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There is also such a thing as collateral. This is an asset that the lender is willing to accept as collateral for a loan. It guarantees that it is possible to return the borrowed amount in case the position is unprofitable. Leveraged trading on some pairs requires more collateral to open or increase an order. Some tokens that are used as collateral also have a collateral discount applied to them. This is the difference between the market price and the value of the collateral. It reduces the dollar price for individual coins by a certain percentage. The leverage, on the other hand, is applied to the reduced collateral price. The collateral is listed in the “Trading – Orders” section.

Types of positions

As long as there is an initial amount of funds on the margin account, Bitfinex funding market gives the opportunity to make loans for short and long positions. In the first case, the user sells cryptocurrency now to buy it later at a lower price, earning income for the rate difference. A long supply means that the trader buys coins in order to sell them in the future at a price that will be higher than the original price.

How do I open it?

Leveraged trading offers are opened on Bitfinex using funds from a margin balance as collateral. Before you start trading, it’s important to make sure you have funds in your margin wallet. You can then open a new position by doing the following:

• Go to the Trade page.
• Select the desired pair from the “Tickets” menu.
• Select “Margin Trading” at the top right.
• Create an order by specifying the type, quantity and cost, just like when you open an ordinary order.
• When the order is executed in the order book, a request will be created, information about which will be displayed in the widget with the same name.

Trading fees will be deducted from the wallet when the order is executed. The fees depend on the trading volume for the last month. When the margin order is executed, the service will automatically select collateral at the best price. Otherwise, you can reserve collateral yourself and use it when it is decided to open or increase the offer. If there are no suitable orders on the books to provide active margin positions, Bitfinex will act as a liquidity provider for those in need of funding.

How to close?

To close a margin offer, the user needs:

• Click on “Close”. In this case the market order to buy or sell will close the short or long position.
• Place an order of the same size, opposite the open order.
• When the order is fully executed, it will close and the profit or loss will be listed on the Bitfinex margin balance.

How do you recall?

This feature allows you to use an asset from the margin balance to cover through a buy and sell transaction. If an offer is withdrawn in full or in part, there must be enough money in the wallet (partial profit or additional amount) including commissions for coverage. By withdrawing the position, the user will pay a taker commission, whose amount will depend on the current trading volume. If the trader is in a BTC/USD short order, the balance will be credited with dollars (base value multiplied by the order size) after the withdrawal. A commission of 0.2% will be deducted from the amount credited to the account. If the order is long, BTC will be credited to the balance.

The function converts a margin trade to an exchange when a position is closed with the user executing independently and returning the funds to the liquidity provider. Withdrawals are not linked to trading transactions. If there is not enough balance to withdraw an offer, the service will display the message “Need to sell XX BTC at the current price”. It is also possible to reduce the size with different types of orders before the withdrawal.

Interest rate

Each order is charged a rate, which is determined through “Funding” or the auto-selection system by the best rate available on the platform. The rate is daily, and interest is deducted after funds are reserved, regardless of whether they have been used. Funding interest is calculated on a second-by-second basis.

Margin Call and Liquidation

The Margin Call notification is triggered when the value of the volume of funds decreases below the required amount. In case the net value of one Bitfinex account’s funds volume (margin wallet balance + P/L + financial collateral) decreases by 1.5 times the level of supported margin, the user will receive a notification on the web site or via e-mail.

The service warns that it does not guarantee receipt of an email with a Margin Call at times when market volatility is high. The trader himself should monitor his supporting margin and have a sufficient amount in his wallet. Supporting margin is a percentage of the amount of funds on the balance (the amount on the margin account + P/L with close-out fee – financial collateral), which is needed to maintain and avoid forced liquidation.

When the Bitfinex account net worth decreases below the required maintenance margin level, the offer is liquidated. This process occurs when the maintenance margin requirements are met, causing the service to create an order to close positions and liquidate them, with the loss being deducted from the margin account. Orders may also be forcibly liquidated if the value of the collateral decreases and is not sufficient to maintain the margin level. The value of maintenance margin may vary depending on the pairs used to open the position. If these are pairs that the exchange considers risky, the order may be liquidated with an increased margin. At the time of opening an offer, the user will see an approximate liquidation price.

Obtaining collateral for margin positions

For margin trading, the user borrows funds, which means they are charged interest on the amount borrowed. The interest is determined by the peer-to-peer funding platform, taking into account supply and demand. There are 2 ways to borrow funds to open a long or short position:

• Auto-selection of the required amount for financing at the best rate at the time of the transaction.
• Reservation of funds in the Financing section by yourself.
• To reserve an asset manually, a Bitfinex user must:
• Go to the financing page and select a currency.
• Specify the amount, rate and term and click on the “Purchase” button. Financial security will be credited when the bidder is found.

It is also possible to take advantage of additional financing options. This option provides quick access to additional conditions in order to get the right amount to trade. To find it, you need:

• Go to “Order Form – Margin Trading”.
• Click the 3 dots next to the tab name and select “Advanced Settings”.

When the deadline for loan funds expires, the service automatically selects active offers with the best conditions.