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Huobi adds new futures liquidation mechanism to protect crypto traders against market volatility

Image by Huobi Global from YouTube

Mon, 23 Mar 2020, 09:49 am UTC

Huobi DM, leading digital assets derivatives trading platform from Huobi Group, has added a new futures liquidation mechanism to hedge crypto traders against market volatility

In a press release, the Singapore-based digital assets derivatives announced that it launched a liquidation mechanism that aims to minimize crypto traders’ exposure to severe market volatility.

Futures contracts allow users to speculate on the future price of underlying assets, but it may also result in unnecessary exposure. In traditional futures trading, the liquidation is triggered in full when the user’s margin ratio is equal to or less than zero which causes extensive losses.

Huobi DM’s risk management provides users a safe, secure and reliable trading platform with its new mechanism that reduces a user’s position rather than liquidating them in full in a single event. The system will automatically start liquidating a user’s positions at predetermined margin ratios determined by the user’s calculated exposure until the margin ratio reaches above zero.

It includes a circuit breaker that automatically stops the liquidation when large or unusual deviations between the liquidation price and market price are detected.

"Market volatility creates new arbitrage opportunities for users, but it can also lead to unnecessarily high-risk circumstances if the right measures aren't in place to protect them," said Ciara Sun, VP of Global Business at Huobi Group. "Our goal is to safeguard our users' assets while providing a robust trading experience, so we're using this partial liquidation mechanism to minimize the downside without diluting the potential upside.”

All coins and leverages on Huobi DM are supported by partial liquidation and it is available without fees. Huobi DM has been around for less than two years, but it has quickly become one of the top cryptocurrency derivatives markets globally.

According to CoinGecko, Huobi DM is the largest derivatives exchange by daily trading volume. Last month, its average daily trading volume was $5.7 billion USD, showcasing a 227% increase since the end of 2019. Thus, the new liquidation mechanism will be helpful to it.

“An exchange's liquidity is just as important as its features. Huobi DM has the highest daily turnover and market depth in terms of delivery contract, so we believe our new liquidation feature will have far-reaching benefits for the wider crypto community by helping minimize sudden price movements caused by abnormal liquidation events,” Sun added.

Huobi DM has received a firmware update that increases transaction throughput by over 50% and doubles the system response time. Later this month, it will launch perpetual swaps with up to 125X leverage starting with support for BTC swaps. It will also expand its market globally to include OTC loan service and options trading.

Meanwhile, Huobi joined the Governance Council of Klaytn, a blockchain project led by South Korea’s Internet giant Kakao. The Governance Council is a consortium of trusted entities that run the Klaytn platform.

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