Tapbit adopts mark price to avoid unnecessary liquidations, forming apart of its highly leveraged products. Without this relatively sophisticated system, when the market is either being manipulated or its actually illiquid, the mark price may swing unnecessarily in relation to its index price, leading to, in many cases, an unnecessary liquidation.
Mark price is adopted for situations where there is either an unrealized PNL, liquidations and funding fees.
NOTE: When you open a position, you may see a positive or negative unrealized PNL immediately, this usually happens when the fair price is usually different from the actual fill price. This is in reality quite normal and does not mean you have lost the said asset, but in actual fact this prompts you to be sure that you pay attention to your Liquidation Price to avoid a premature liquidation.
Calculation of the Mark Price
Mark Price = Median (Price1, Price2, Latest Contract Price)
- Price1 = Index Price * (1 + Latest Funding Rate * (Time Until Next Funding / Funding Interval))
- Price2 = Index Price + Moving Average (2-Minute Basis)
Explanation:
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Moving Average (2-Minute Basis):
- Moving Average (2-Minute Basis) = Sum[(Bid Price1_i + Ask Price1_i)/2 – Index Price_i] / 24
- This is calculated as the average of the bid and ask prices minus the index price. The value is computed every 5 seconds and takes the average of the most recent 24 data points within the last 2 minutes.
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Price1:
- The “Time Until Next Funding” for Price1 is rounded. For example, if the current time is 2024-07-11 02:30 UTC and the next funding time is at 08:00 UTC on the same day, the remaining time is 5.5 hours. Rounding this gives 5 hours. Therefore, Price1 = Index Price * (1 + Latest Funding Rate * (5/8)).
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Mark Price:
- The mark price is the median of Price1, Price2, and the Latest Contract Price. For instance, if the current values are such that Price2 < Price1 < Latest Contract Price, then Price1 will be used as the mark price.
Tapbit Team
