How to calculate the liquidation price?
The formula for calculating the liquidation price for a margin trade using currency "i" is as follows:
- "i" represents the currency "i";
- "Ai" represents the total amount of "i" assets;
- "Li" represents the borrowed amount of "i" asset;
- "Ri" represents the amount of interest payable on "i" asset;
- "Pi" represents the index price of the "i" asset/BTC (or USDT) pair;
- "li" represents the liquidation price for the "i" asset.
Liquidation will be triggered when the risk ratio reaches the liquidation risk ratio.
Risk Ratio = Total Assets / (Total Amount Borrowed + Interest Payable).
Using the "i" currency as an example:
Therefore, the liquidation reference price for "i" currency is:
Ratio of the Index Price to the Liquidation Reference Price = (Liquidation Price - Index Price) / Index Price.
Binance Margin calculator
You may also use the Binance Margin Calculator or the backward calculation method to get an estimated liquidation price.
For example:
The Cross Margin liquidation ratio is at 1.1
Asset / Liability = 1.1
User A has 10,000 USDT as collateral and borrowed 20,000 USDT to purchase 1 BTC at $30,000. Now, their margin position is 1 BTC (asset) and 20,000 USDT (debt).
Liquidation price (USDT) :
- Asset Price / 20,000 = 1.1
- 1.1 * 20,000
- 22,000
The estimated liquidation price for BTC in this scenario is $22,000.
Example of liquidation price calculations
User C transfers 100 USDT into his Cross Margin 5X account, and borrows 0.4 ETH (assuming ETH/USDT price is $1,000). Initial Margin is 1.25 and Liquidation Margin Level is 1.1.
- Margin Level = Asset / (Total Liabilities + Outstanding Interest) = (0.4 * 1,000 + 100) / (0.4 * 1,000) = 1.25
Assuming ETH interest is 0.01% per hour, User C accrues 0.00004 ETH in interest after 4 hours (0.4 ETH * 0.01% * 4 hours). User C has also placed an order to sell 0.4 ETH at $1,100. The order is not filled at this point. Liquidation Price for ETH in USDT:
- (0.4 ETH * ETH Price + 100 USDT) / (0.4 ETH principal + 0.0004 ETH interest) * ETH Price = 1.1 (Liquidation Margin Level)
- 0.4 ETH * ETH Price + 100 USDT = 1.1 * 0.40004 ETH liability * ETH Price
- ETH Liquidation Price = 100 / (0.040044) = $2,497.253
User C sells 0.4 ETH for 440 USDT at ETH/USDT price of $1,100. Liquidation Price for ETH in USDT:
- (440 USDT + 100 USDT) / (0.40004 ETH * ETH Price) = 1.1 (Liquidation Margin Level)
- ETH Liquidation Price = 540 / 0.440044 = $1,226.0466
- Please note that this liquidation price calculation only applies after User C’s sell ETH order has been filled, and positions have been updated accordingly.
User C accrues an additional 0.00288 ETH in interest after 72 hours (0.4 ETH * 0.01% * 72 hours). The new Liquidation Price for ETH in USDT:
- (440 USDT + 100 USDT) / (0.40328 ETH * ETH Price) = 1.1 (Liquidation Margin Level)
- ETH Liquidation Price = 540 / 0.443608 = $1,217.2909
Why can't I view the liquidation price for my positions?
In some cases, the liquidation price may be displayed as “/” or “--” for a particular position. This is because the liquidation price for each token is calculated with an assumption that the asset value of other positions remain the same.
When the asset value of certain positions may not cause liquidation (even if those positions become $0 in value), the liquidation price won’t be displayed. For example:
User B has 10,000 USDT as collateral and he borrowed 20,000 USDT to purchase 1 BTC at $29,000 and 1 ETH at $1,000. Now his margin position is 1 BTC and 1 ETH (asset) and 20,000 USDT (debt).
Liquidation price of BTC in USDT (assuming the ETH price remains constant at $1,000):
- (BTC Price * 1 BTC + ETH Price * 1 ETH) / $20,000 = 1.1
- (BTC Price * 1 BTC + $1,000) / $20,000 = 1.1
- BTC Liquidation Price = 1.1 * 20,000 - 1000
- BTC Liquidation Price = $21,000
Liquidation Price of ETH in USDT (assuming the BTC price remains constant at $29,000):
- (BTC Price * 1 BTC + ETH Price * 1 ETH) / $20,000 = 1.1
- ($29,000 + ETH Price * 1 ETH) / $20,000 = 1.1
- ETH Liquidation Price = 1.1 * 20,000 - 29,000
- ETH Liquidation Price = -$7,000 < 0
In the above example, even if the value of the ETH position goes to $0, there’s still $29,000 worth of BTC against $20,000 USDT debt. Therefore, no liquidation will occur. In this instance, the liquidation price for ETH will be displayed as “/” or “--”.
Disclaimer and Risk Warning: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. Digital asset prices are subject to high market risk and price volatility. The information provided does not constitute, in any way, a solicitation or recommendation or inducement to buy or sell the products. The value of your investment may go down or up, and you may not get back the amount invested. Cross-margining contributes to providing greater leverage than a regular margin account, and greater leverage creates greater losses in the event of adverse market conditions. There is increased risk that a user's cross-margin positions will be liquidated involuntarily, causing possible loss. Comments and analysis do not constitute a commitment or guarantee on the part of Binance. You are solely responsible for your investment decisions and Binance is not liable for any losses you may incur. Past performance is not a reliable predictor of future performance. You should only invest in products you are familiar with and where you understand the risks. You should carefully consider your investment experience, financial situation, investment objectives and risk tolerance and consult an independent financial adviser prior to making any investment. This material should not be construed as financial advice. This product may not be available in certain countries and to certain users. This content is not intended for users/countries to which prohibitions/restrictions apply. For more information, see our Terms of Use and Risk Warning. To learn more about how to protect yourself, visit our Responsible Trading page.