Q1: What is cross margin, and what are its advantages?
Answer: In the cross margin mode of spot trading, the assets are shared by all positions as margin. Compared with the more common isolated margin mode, cross margin allows you to offset losses with the gains across positions, which enables efficient fund utilization and reduces your chances of getting liquidated. Here is an example: Jack borrowed ETH and BTC to buy USDT and used USDT as the margin. After the borrowing, ETH's price declined while BTC's climbed up. In the case of the isolated margin mode, the debt accrued in the BTC/USDT position increases as BTC's price rises, potentially leading to forced liquidation. Under the cross margin mode, however, the increase in debt caused by BTC's rising price is offset by a decrease in debt due to ETH's drop in price, substantially reducing Jack's chances of getting liquidated.
Q2: What is the maximum leverage of Poloniex cross margin trading? Which assets can be used as margin?
Answer: Poloniex cross margin trading supports a maximum leverage of 3x. In phase 1, USDT, BTC, ETH, and TRX can be used as margin. Depending on the market condition, Poloniex will support more currencies as margin assets or provide higher leverage in the future.
Q3: How to borrow assets in the cross margin mode? Which assets are available for borrowing?
Answer: We have launched a new "Auto-Borrow & Repay" mode with the cross margin product. By enabling "Auto-Borrow", you will be able to borrow cryptos when making trades, transfers, and withdrawals. The buy/sell/transfer/withdrawal amount exceeding your available amount of the currency will be your borrowed assets, and Poloniex will calculate your borrow limit based on the overall margin ratio of your spot account. In phase 1, USDT, BTC, ETH, and TRX are available for borrowing. Other currencies will be supported in the future, depending on the market condition.
Q4: Which trading pairs are supported for cross margin trading?
Answer: A margin trading pair is defined as one in which borrowing is supported for both its base and quote currencies. All margin trading pairs are marked with leverage (e.g., "3X") on the Trade screen. When placing buy or sell orders in the margin trading pairs, you can borrow funds automatically. (Note: By turning “Auto-Borrow” on, you can also borrow funds automatically when trading in currency pairs that contain only one margin asset.)
Q5: How does Poloniex set the interest rates for different currencies in the cross margin mode?
Answer: We use interest rates on major crypto exchanges as a reference and adjust them dynamically based on user demand on Poloniex. We are confident that Poloniex offers the most competitive interest rates in the market. You can view information such as the interest rate, borrow limit of different currencies, currencies borrowable, and collateral rate in Profile > Trading Tier Status > Borrow Interest & Cross Margin Limit.
Q6: How is interest charged in the cross margin mode?
Answer: Interest in cross margin trading is charged on an hourly basis. It is incurred every hour on any assets you may have borrowed. Interest calculation formula:
- Interest = Borrowed * Daily interest rate/24
Borrowing occurs when you successfully place an order with a loan (open orders with borrowed assets also incur interest), transfer or withdraw an amount that exceeds the available amount of the currency, and at times when your interest accrues hourly.
Q7: How to repay the assets borrowed in the cross margin mode?
Answer: With the new "Auto-Borrow & Repay" mode enabled, every time you buy / transfer in / deposit a currency where you have assets borrowed, the asset will be automatically used for repayment to free you of extra interest charges.
Q8: Will I be liquidated in the cross margin mode?
Answer: There is a likelihood that your position will be liquidated even in the cross margin mode. You can check the margin ratio of your account anytime on Account or Trade screen. When your margin ratio falls below 150%, Poloniex will send you a Margin Call email requesting more funds to be added to your margin, and you will not be able to borrow any other assets at this point; when your margin ratio falls below 100%, Poloniex will freeze and liquidate your spot account.
Q9: What is Mark Price in cross margin?
Answer: Poloniex uses Mark Price as a reference in liquidations. It is an estimated fair value of an asset. Mark Price on Poloniex is an aggregate price extracted from nine major crypto exchanges (Binance, Huobi, OKX, BinanceUS, Poloniex, Digifinex, Bibox, Kucoin, and Gate), weighted by their relative volume.
Q10: What is Collateral Rate in cross margin?
Answer: Poloniex applies a value haircut to the assets in your account when they are used as margin because prices of crypto assets are highly volatile, and Poloniex factors this fluctuation into their valuation for risk mitigation. If, for example, you want to use BTC (priced at $20,000) as margin and its collateral rate is 0.95, then each BTC will be valued at $19,000 ($20000*0.95=$19000) when used as margin.
Q11: What are Initial Margin and Maintenance Margin in the cross margin mode?
Answer: The collateral required for you to take on each new loan is defined as Initial Margin.
- Initial margin = Borrow amount * Last price of the currency * Initial margin ratio of the currency.
The maintenance margin is the minimum amount of collateral required to keep your margin positions from being liquidated.
- Maintenance margin = Borrow amount in the currency * Last price of the currency * Maintenance margin ratio of the currency
Click here for a full list of initial margin and maintenance margin requirements for different currencies.
Q12. How is the Margin Ratio calculated in Poloniex's cross margin mode?
Answer: The calculation formulas are as follows:
- Margin ratio = Total margin / Maintenance margin (10%)
- Total margin = Effective balance + Total debts
- Effective balance = ∑(Balance of the currency * Last price of the currency * Collateral rate of the currency)
- Total debts = ∑(Debt in the currency * Last price of the currency)
Q13: Why do I have a negative balance for a currency? Is my account at risk?
When the total value of your borrowed assets (including interest) in a currency exceeds its available amount plus the assets in use, the balance of this currency will be negative. But this does not necessarily mean that your account is at risk. As long as you hold positive balances in other currencies with a margin ratio higher than 200%, your account is not at risk of liquidation. Besides, you can still trade, transfer, or withdraw the currency with a negative balance.
Q14: Why is it that I made deposits in a currency, but its available amount didn't increase?
Answer: If your balance in a particular currency is negative (meaning you have borrowed assets in this currency), the available amount shown for this currency will be zero. In cases where the amount of assets you deposit into the spot account is smaller than that of the outstanding loan, your balance in this currency is still negative; therefore, its available amount will still be zero. But as a result of the deposit, your actual balance in this currency increases, which drives up the margin ratio of your account and lowers your chances of getting liquidated. You are advised to take the "Balance" field as the reference for any changes to your balance after deposits/withdrawals/transfers.
Q15: Why am I not allowed to withdraw a currency whose available amount is greater than zero?
Answer: Withdrawal will fail if you have any outstanding loan in other currencies and the margin ratio of your spot account falls below the required level after the amount you wish to withdraw is deducted. In such a case, you will need to add more funds as margin or repay the loan in other currencies before you can withdraw this currency.
Q16: Why is my account not liquidated when sometimes the margin ratio falls below 100%?
Answer: The margin ratio you see is calculated with the last price of the spot market on Poloniex, while forced liquidation is only triggered when the margin ratio calculated with both the last price on Poloniex and the mark price falls below 100%. In extreme volatilities, such cases will occur where the margin ratio is below 100%, yet liquidation is not triggered. In these cases, you are advised to repay the assets borrowed or add more funds to margin to increase the margin ratio.