A closer look at the Bit Crypto Exchange's Bit Crypto

A closer look at the Bit Crypto Exchange's Bit Crypto

The bit crypto exchange recently introduced its own ADL to enrich your accounting control system.

While retailers are concerned about the forced liquidation caused by this ADL mechanism, BIT claims that this serves for better risk management and the guarantee of trade fairness. Let us immerse yourself.

What is Adl?

ADL stands for Auto-Deleveraging or Automatic Deleverening and is a mechanism that is used by some cryptocurrency exchanges to manage your risk and ensure the stability of your trading platform.

If the market on the bit crypto tour moves against a levered position and the maintenance margin rate of the user account exceeds 100 %, the compulsory liquidation mechanism is triggered.

The system first tries to liquidate the account by comparing orders on the order book market. If the outstanding order can find a agreement on the order book market and is fully executed, the forced liquidation is completed as expected.

If the outstanding order cannot be carried out due to a lack of liquidity and the minimum march replacement of the account continues to increase due to one-sided market fluctuations, the automatic deleveraging mechanism is triggered to ensure the forced liquidation.

After the automatic debt has been triggered, the forced liquidation is abandoned by order matching, and instead the system finds a counterparty directly, which is determined by the algorithm for the account to be liquidated, and acts directly at the marked price. In this way, the compulsory liquidation can be successfully completed and the risk of bankruptcy can be reduced. At the same time, the counterparty of the liquidated account is automatically noticed by the provision of liquidity.

The automatic debt mechanism should effectively prevent the equity of the stock exchange during a black swan event is a source of winning for users in the derivate trade, and continues to guarantee the solvency of BIT and the safety of all users' funds.

Therefore, retailers should be aware of the potential risks associated with the lit trade and the specific ADL guidelines of the stock exchanges they use.

functions connected to the ADL application

The main advantage of using ADL (Auto-Deleveraging) for a cryptocurrency exchange is risk management. By implementing ADL, the stock exchange can limit its risk of loss by leverage, which can be particularly important in volatile markets in which sudden price movements can lead to significant losses.

Here are some of the potential advantages of using ADL:

• Risk management: ADL helps exchanges in risk management by automatically closed when they achieve a certain degree of liquidation, which reduces the risk of major losses for the stock exchange.
• platform stability: By reducing the risk of major losses, ADL can help to maintain the stability of the trading platform and prevent potential system failures that could result from sudden losses.
• lower insurance contributions: By limiting the risk of the stock exchange, ADL can reduce the need for insurance contributions, which can lead to lower trading fees for users.
• improved liquidity: ADL can help dealers have access to liquid markets even in times of high volatility by reducing the risk of major losses that could lead to market disorders.
• Fairness: ADL helps ensure that retailers who take a high leverage and a high risk are responsible for their losses instead of the stock exchange and its other users are forced to bear the costs.

What can retailers do to avoid triggering ADL?

In order to avoid triggering ADL (auto-deleveraging) on ​​a cryptocurrency exchange, retailers should carefully manage their risk and use levers responsibly. In general, retailers should use an appropriate leverage, carefully monitor their margin levels and maintain a sufficient margin to avoid liquidation. The setting of stop-without orders and the diversification of your portfolio will also be helpful. It is also important to understand the AdL rules of the stock exchange clearly.

On bit, accounts with automatic debt reduction are classified based on their margin and their profit value. The higher the margin and profit scale, the higher the rank in the automatic debt sequence. The margin and winning points are calculated as follows:

margin and profit score = margin rate of the account * return of position

The risk of automatic debt removal of your account is clearly displayed on your position page. The light on the right side of the product shows the position of the user in the order of automatic debt removal. The more lights glow, the higher the likelihood of debt removal.

Users receive an SMS or email notification with details if your position has been automatically broken down. Users can also view this information in the order history. If the position of an account has been automatically owed, it can be opened again at any time.

Most accounts that are forced to liquidation are due to their own high leverage and the high volatility of the market. In fact, the accounts that are at the top of the automatic deleveraging order are not excluded from this fate. The only difference is that the current market volatility prefers the page, which is automatically iced up, and not the page that is forced to liquidation.

But who can guarantee that a high market volatility does not turn an automatically echoes into an account that is forced to liquidate? Therefore, the automatic debt mechanism not only offers liquidity protection for the accounts that are forced to liquidation, but also effectively protects the accounts that are subject to the automatic submissive process. After all, the timely backup of profits is a clever move.