What is collateral weight and how does it work?
Collateral weight is a weighted correction factor that is applied to collateral assets according to their collateral value. Each asset has its own unique collateral weight. You can familiarize yourself with the current information on available assets on the "Trading Rules" page.
The weight of each asset is determined based on its liquidity and other factors in the cryptocurrency market. Different assets show different degrees of liquidity in the order book. For example, when making a trade to buy or sell an asset for, say, 1,000 USDT, the price step may be 1% for some assets and 99% for others. On WhiteBIT, all assets available for margin trading have liquidity, but even among them the level of liquidity can vary. Thus, the weight of each asset is determined depending on its liquidity and other factors in the overall cryptocurrency market.
How does it affect assets?
The value of collateral has no impact on the spot market and only matters in the context of leveraged trading and Crypto Borrow. On our exchange, margin trading is carried out on a cross-margin basis, which provides the convenience of simply transferring any asset that can be used as collateral to the collateral balance for leveraged operations. When opening a position, the system automatically converts this asset into USDT in the background – this is a process we call normalization.
Let's look at how the available balance for trading is calculated in more detail using examples:
With one asset on the balance:
- For example, there is 1000 USDT on the balance and collateral weight of USDT = 100%, which means that the entire balance can be used as collateral.
- Or, let's say there is 100 DOT with a current DOT price of 5 USDT. Collateral weight of the DOT is 95%, which means that 95% of the value of the DOT is used as collateral.
Funds for trading = 0.95 × (100 DOT × 5) = 0.95 × 500 USDT = 475 USDT
With multiple assets on the balance:
There is 500 USDT, 10 BCH (with a BCH price of 100 USDT) and 10 LTC (with a LTC price of 90 USDT) on the balance.
According to the "Trading Rules" page:
- Collateral weight of USDT is 100%
- Collateral weight of BCH is 90%
- Collateral weight of LTC is 95%
Let's calculate the funds for trading, taking into account the quantity of each asset and their price:
Funds for trading = 500USDT + (0.9 × 10BCH × 100USDT) + (0.95 × 10LTC × 90USDT) = 2255 USDT
Please note: collateral weight for USDT and BTC is always estimated at 100%, as they are usually the basic assets.
In addition to the collateral weight, there is a limit on the maximum number of coins that can be provided as collateral. These ratios are also applied in the process of granting a Crypto Borrow, where they determine the amount that can be borrowed.
Information about the current values for each asset is available on the "Trading Rules" page.
In case of any questions related to the functionality of our exchange, you can: