Bitmax is an innovative new generation exchange which has taken the exchange industry by storm since its infancy. After launch, it didn't take much time before it got listed on Coinmarketcap. One thing that is striking about Bitmax exchange is their amazing work ethic. The relentless team carries out listing of new projects almost on a daily basis but more importantly, their method of carrying out airdrops and AMA (Ask Me Anything) sessions just to get people educated about their new project is a never-seen-before strategy in the industry.
Bitmax recently announced the launch of Margin Trading on their exchange, a process that will allow Bitmax users borrow funds from the platform that will enable them to trade more digital assets than they normally are able to afford. It increases their buying power to potentially achieve higher return and makes it possible for them to generate positive profits when the market price goes both up and down. The trader’s own funds serve as collateral (margin) for the loan. Once a trader's position is closed, their purchased assets will automatically be deducted as loan repayment against borrowed Asset. This will in turn increase the volume and liquidity of the platform, and ultimately benefit its platform users.
How Does BitMax.io Margin Trading Work?
- Initiate the Function with Margin Account
To better protect the fund of clients, BitMax.io margin trading requires a separate “Margin Account.” Users must transfer their assets from Cash Account to Margin Account as collateral for margin loan before starting margin trading. Upon transfer, users do not need to request for margin loan. System will automatically apply the maximum leverage based on their “Margin Asset” balance.
- Interests of Margin Loan
To keep users well updated of their asset status, interests of margin loan are calculated and updated on user’s account page every 8 hours. Less than 8 hours will be counted as 8-hour period.
BitMax.io allows users to repay the loans by either transacting the assets from the Margin Account or transferring more assets from the Cash Account. This is very friendly, especially to new margin traders.
- Computation of Margin Requirement and Liquidation
Initial Leverage = 3
Initial Maintenance Leverage = Initial Leverage *2
Effective Initial Margin (EIM) = (Borrowed Asset + Interest Owned) / (Initial Leverage -1)
Effective Maintenance Margin (EMM) = (Borrowed Asset + Interest Owed) / (Initial Maintenance Leverage -1)
Current Leverage = Total Asset / Net Asset (which is Total Asset – Borrowed Asset – Interest Owed)
Margin Call: When Net Asset is lower than 1.2 times of EMM, the user will receive a margin call via email.
Liquidation: When Net Asset is lower than EMM, the user’s margin account will be subject to liquidation.
- Liquidation Process
In order to mitigate price deviation due to market volatility, BitMax.io uses composite reference price for the calculation of margin requirement and forced liquidation. The reference price is computed by taking an average last trade price from five exchanges (if available at the time of computation) – BitMax.io, Binance, Huobi, OKEx and Polonium and removing the highest and lowest price. Users are allowed up to 48 hours to take action for loan repayment.
- Typical Use Case
Take an example of BTC/USDT with 10th leverage.
If you expect that BTC price would go up from 10,000 USDT to 20,000 USDT, you can borrow a maximum of 90,000 USDT from BitMax.io with 10,000 USDT capital.
At the price of 1 BTC = 10,000 USDT, you can buy 10 BTC and then sell them when the price doubles. In this case, your profit would be
10 BTC* (20,000 – 10,000) = 100,000 USDT
Without the margin, you would only have realized PL gain of 10,000 USDT. In comparison, margin trading with 10x leverage amplifies the profit by 10 times.
On the other hand, what if you expect that BTC price would drop from 20,000 USDT to 10,000 USDT?
You can borrow a maximum of 9 BTC from BitMax.io with 1BTC-equivalent of capital margin.
At the price of 1 BTC = 20,000 USDT, you can sell 10 BTC and then buy them back when the price drops by 50%. In this case, your profit would be
10 BTC* (20,000 – 10,000) = 100,000 USDT
Without the ability to trade on margin, you would not able to short the token in anticipation of falling price.
To know more about Bitmax and its Margin Trading, follow these links:
Website: http://www.BitMax.io
Twitter: https://twitter.com/BitMax_Official
Reddit: https://www.reddit.com/r/BitMax/
Telegram: https://t.me/BitMaxioEnglishOfficial
Medium: https://medium.com/bitmax-io