Bankruptcy: A condition when a trader loses all his Initial Margin during the event of Liquidation.
Bankruptcy Price: The price at which a trader would have lost all his Initial Margin.
It’s important to know, that positions of traders who experience loss will always be liquidated (triggered by the Mark Price) at a price slightly better than their Bankruptcy Price because the exchange sets the Maintenance Margin.
Maintenance Margin serves as a buffer that protects the exchange from having positions liquidated at a price worse than the Bankruptcy Price and thus suffer a loss. Learn more about Maintenance Margin here.
Bankruptcy Price: Calculation for a Long position
Bankruptcy Price: Calculation for a Short position
Bankruptcy Price: Example
If a trader opens a Long position at the Entry Price of BTC/USD 8,000 and 20x Leverage, his Bankruptcy price would be approximately 7,604.
If a trader opens a Short position at the Entry Price of BTC/USD 8,000 and 20x Leverage, his Bankruptcy price would be approximately 8,403.