Main Takeaways
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Users come across two different prices when trading on BloFin Futures: Last Price and Mark Price.
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Last Price is the latest trade price of a contract and Mark Price is the estimated fair value of a contract.
- To avoid unnecessary liquidations in a volatile market and prevent price manipulation, BloFin Futures uses the Mark Price as a reference in liquidation.
Futures Trading allows traders to gain exposure to cryptocurrencies without the need to possess the underlying asset. A futures contract’s price depends on the underlying asset’s spot price. The spot price refers to the current market price of the cryptocurrency at which it can be bought or sold for immediate settlement.
In ideal conditions, the price of a futures contract (last price) follows the spot price of the underlying asset. However, this is not always the case, as futures trading have their own demand and supply dynamics, which often leads to differences in the prices of these futures trading and their underlying assets.
This is why you may have come across two different prices when trading on BloFin Futures: Last Price and Mark Price.
What Is the Last Price?
Last Price refers to the latest trade price of the futures contract. In other words, the last trade of a particular contract defines its Last Price.
A futures trading, such as the BTCUSDT, derives its value from the underlying asset, which, in this case, is bitcoin BTC. These futures trading have their own supply and demand volumes as traders constantly buy and sell them on BloFin Futures. This may create a unique price for the BTCUSDT contract, which may be different from the spot price of BTC.
Thus, the Last Price of a futures contract could gradually deviate from the actual price of the underlying asset being traded in the spot market. Higher trading volumes in the Futures market further boost the inconsistency in prices.
To create a more stable and reliable price structure for futures trading, BloFin Futures relies on Mark Price.
What Is Mark Price?
Mark Price refers to the estimated true value of a contract. Also known as “marking-to-market,” it takes into consideration the fair value of an asset to prevent unnecessary liquidations during a volatile market. BloFin Futures uses Mark Price as a trigger for liquidation.
On BloFin Futures, the Mark Price of a contract is determined by considering several factors. These include the Last Price of the futures contract, the first bid and first ask prices from the order book series, the funding rate, and a composite average of the spot price of the underlying asset on major crypto exchanges. This methodology helps avoid a potential outsize influence on the price by a single order book or exchange. It balances and smoothes out abnormal price fluctuations during times of high volatility.
The Mark Price is used as a reference point for: Liquidations
Liquidation occurs when the Mark Price hits the liquidation price of a position. Using Mark Price protects users from unfair liquidations due to a short-term fluctuation in the Last Price when, in reality, the spot price of the asset did not reach the liquidation level.
If you would like to further understand the technicalities of Mark Price, please refer to the following FAQ pages: Index Price & Mark Price
Last Price vs. Mark Price
To simplify, let’s take the following analogy to understand the difference between the Last Price and Mark Price: the Mark Price is like the average price of gasoline in the whole country, whereas the Last Price is the price of a gallon you pay at a specific gas station close to where you live.
Mark Price is not used in the actual trading and can be regarded as an indicator that monitors a position’s risk, while the Last Price is the essential market price that every user trades on.
The Bottom Line
On BloFin Futures, a contract’s liquidation price is always its Mark Price, as it is a more reliable and stable value measuring tool. It is important to note that Mark Price is only an average price and not the actual price traded in the Futures market.