Bankruptcy Price is the price at which your entire initial margin is exhausted. When a position is liquidated, it is closed at the bankruptcy price—meaning your initial margin has been fully used. If the final execution is better than the bankruptcy price, the leftover margin is added to the Insurance Fund. If the execution is worse than the bankruptcy price, the Insurance Fund covers the shortfall so losses don’t spill over to other traders.
For isolated margin positions, the bankruptcy price depends on your entry and leverage:
- Long (Buy):
Bankruptcy Price = Entry Price × (1 − Initial Margin Rate) - Short (Sell):
Bankruptcy Price = Entry Price × (1 + Initial Margin Rate)
where Initial Margin Rate (IMR) = 1 / Leverage.
Example (Short / Isolated Margin):
You open a short on ETH at an entry of 3,000 USDT with 20× leverage.
- Initial Margin Rate (IMR) = 1 / 20 = 5%
- Bankruptcy Price (Short) = Entry × (1 + IMR) = 3,000 × (1 + 0.05) = 3,150 USDT
If ETH rises to 3,150 USDT, your initial margin is fully consumed. Upon liquidation, the system aims to close the position around this level. If execution is better than 3,150, the difference goes to the Insurance Fund; if it’s worse, the Insurance Fund covers the shortfall.
