Dual-Price Mechanism: A condition when Liquidation is triggered by an average market price and not the Last Traded Price of the exchange.
Risky traders or whales can band together to move BTC/USD price on a single exchange, which might lead to numerous liquidations. To avoid internal market manipulations BTCMEX uses the Mark Price as a trigger for Liquidation, while the liquidated position is closed at the Last Traded Price. Learn about the process of Liquidation here.
The Dual-Price Mechanism on BTCMEX is based on:
Mark Price – the average market price (Index Price) + a decaying Funding Basis.
Last Traded Price – the internal price on the exchange.
The Index Price is derived from the average BTC/USD price index of major exchanges. On BTCMEX it is calculated equally from three exchanges Kraken, Coinbase, and Bitstamp (33.33% each).
Dual-Price Mechanism is calculated as:
Mark Price = Index Price x (1 + Funding Basis)
Funding here refers to the periodic interest payments between traders which aim to keep the Last Traded Price on BTCMEX as close to the global Bitcoin price index as possible.
The Last Traded Price is the current Perpetual Contracts’ underlying price on the exchange.