To enhance the stability of the contract market, KTX uses the marked price to calculate the unrealized profit and loss of users' positions and the conditions for triggering forced liquidation. The marked price is a reasonable price in the contract market, and there may be some deviation from the latest transaction price in the contract market. Its purpose is to effectively prevent malicious manipulation of the market from causing unnecessary forced liquidation.
I. Purpose of the Marked Price
When the price in the contract market seriously deviates from the spot market price, the marked price can help stabilize the price within the market, avoid significant price fluctuations, and prevent unnecessary forced liquidation caused by market manipulation.
For example, when the price of BTC in the spot market is $100,000 and the latest price in the BTC contract market is $100,100, the marked price can be anchored to the external spot market price to avoid the forced liquidation of users due to price deviation.
Forced Liquidation
Forced liquidation occurs when the marked price reaches the forced liquidation price of the position. In actual operation, when the spot price of the asset has not reached the forced liquidation level, the marked price is used to protect users from the impact of unfair forced liquidation triggered by short-term fluctuations in the latest price.
Unrealized Profit and Loss
It may be difficult to know the actually realized profit before closing the position, so the marked price is used as a reference for calculating the unrealized profit and loss. This also ensures that the calculation result of the unrealized profit and loss is accurate, thereby avoiding unnecessary forced liquidation.