Bitfinex allows users to trade with up to 5x leverage by receiving funding from the peer to peer margin funding platform. Users can enter an order to borrow the desired amount of funding at the rate and duration of their choice, or they can simply open a position and Bitfinex will take out funding for them at the best available rate at that time.
Learn more: How do I open/close a Margin position?
Collateral & Initial equity
The USD value of the funds you hold in your Margin wallets needs to be a minimum of 20% of the USD value of the position you wish to open. For certain margin trading pairs, a greater amount of collateral is required to open/increase the position.
So if you have 1000 USD in your margin wallet, that 1000 USD will serve as collateral for opening margin positions to a maximum of 5:1. ie a margin position with a USD value up to 5000 USD.
Assuming a BTC price of 250 you would be able to open a long or short margin position of 5000 / 250 = 20 BTC
Please note, when holding a currency as collateral that is not the quote currency of the position you wish to open, the maximum allowed margin is slightly lower because it is corrected: [maximum leverage for the pair] - [initial equity%] * [USD value of Margin trading balance in the currency that is not the quote]. The quote currency is the second currency of the pair.
Additionally, haircuts are applied for certain tokens used as collateral for margin trading. Haircuts are that the maximum leverage of certain currencies is reduced by a certain percentage.
Margin Call and Liquidation
Maintenance Margin = The % net equity in your margin wallet (Net Equity = Margin Wallet Balance + P/L (incl. Fees to close) - Funding costs.) to open positions required to avoid liquidation for a pair.
You will receive a margin call (website and email notification when possible) when the net value of your account equity (Margin Wallet value + P/L+ Funding cost) drops below 1.5x the maintenance margin of the value of your open positions. When the net value of your account equity falls below the required maintenance margin, your positions will be force-liquidated.
Let’s say you open a long position of 20 BTC/USD at 250, and the price starts dropping.
The position is worth 20 * 250 =5000 USD
20 % of that is 1000 USD (this is your initial equity)
10 % of that is 500 USD (BTC/USD maintenance margin)
Your current balance is 1000 USD. When the loss on the position is 1000 - 500 = 500 USD, the net value of your margin balance will be 10 % (500 USD) of the value of your position (5000 USD) and your position will be force-liquidated.
This will happen when your position is worth 5000 - 500 = 4500 USD.
To calculate the liquidation price we need to know the price to sell the BTC at to end up with that amount: 4500 / 20 = 225 USD per BTC
The liquidation price will be around 225 USD per BTC. This can vary a bit, due to interest payments and trading fees. But 225 is a quite accurate indication. Liquidation price is affected by multiple moving variables, and may change quickly. The price indicated on the trading page is indicative and not a contractual price.
Funding for margin positions
When you are margin trading you will be borrowing funds and interest rates may be charged.
The rate is determined by our P2P liquidity providing platform and depends on offer and demand. When you open a margin position (long or short) the needed liquidity will be automatically borrowed at the best available rate. Users may also decide to bid for funding themselves on the funding page, for more information please refer to the article: How to manually reserve funding?
Select “Advanced Funding Options” (3 vertical white dots) in the Order Form box which provides quick access to funding parameters.
A margin trader can input some conditions for the required margin funding (while having the order form set to margin > open the drop-down menu by clicking on the three vertical dots > select advanced funding options) and these conditions are taken into account when matching.
When a margin funding contract used in an active margin position expires, the system automatically renews the margin funding with the best available offer(s) at the time.