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.
You may also use the Binance Margin Calculator or the backward calculation method to get an estimated liquidation price.
For example:
- Cross Margin liquidation ratio is at 1.1
- Formula : Asset / Liability = 1.1
User A has 10,000 USDT as collateral and he borrowed 20,000 USDT to purchase 1 BTC at $30,000. Now his 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 USDT
The estimated liquidation price for BTC in this scenario is $22,000.