Mark Price

IBITTERS,

IBIT uses a dual-price mechanism to protect users from losses due to market manipulation.

Market manipulation can widen the gap between futures exchanges' market prices and spot prices, resulting in users facing widespread forced liquidation. Market manipulation not only causes substantial losses to investors' hard-earned wealth but also undermines the credibility of the cryptocurrency industry. IBIT places a high priority on creating a fair trading environment for all users, and therefore, we utilize a dual-price mechanism to prevent market manipulation.

The dual-price mechanism consists of Mark Price and Last Price.

Mark Price

Taking perpetual contracts as an example, Mark Price refers to the global spot price index plus a decreasing funding rate basis. Mark Price represents the real-time spot price of the contract on major exchanges. IBIT uses the Mark Price to set the trigger price for forced liquidation, measuring unrealized profit and loss. However, this does not affect the actual profit and loss for traders. Only when the Mark Price reaches the trader's liquidation price, the trader's position will be forcibly liquidated.

Mark Price Calculation:
Mark Price = Median of (Price 1, Price 2, Last Traded Price)

• Price 1 = Index Price × [1 + Latest Funding Rate × (Time to Next Funding / 8)]
• Price 2 = Index Price + 5-minute moving average
• 5-minute moving average = Moving average [(Best Bid + Best Ask) / 2 − Index Price], sampled every second.

In the following scenarios, IBIT will adjust the criteria for filtering the Mark Price calculation:
- If the index price from any spot exchange appears abnormal or is unavailable, the Mark Price will be calculated based on IBIT's latest traded price.
- Due to factors such as distortion in the index price, insufficient data for the 5-minute moving average calculation, the Mark Price will be calculated based on IBIT's latest traded price.

Note:
- IBIT will use the optimal Mark Price to reduce the risk of forced liquidation in volatile markets.
- IBIT reserves the right to update Mark Price filtering criteria in real-time based on market conditions, without further notice.
- The above calculations are applicable to the Mark Price under perpetual contract trading.

Last Price:

Last Price refers to IBIT's current market price, usually tied to the funding mechanism and spot price. Hence, IBIT product prices are not expected to deviate significantly from the spot market price.

In summary, the dual-price mechanism narrows the price gap, maintains a fair trading environment, and protects traders from malicious forced liquidations.

Note: During market fluctuations, IBIT's latest traded price may temporarily deviate from the Mark Price, potentially leading to unrealized profit and loss after order execution. It's important to closely monitor the difference between liquidation price and Mark Price.

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