Liquidation Approach
Grvt’s smart contract uses audited logic and external 3rd-party price feeds to determine which accounts or positions can be liquidated.
The Grvt trading system can only execute a liquidation if the smart contract validates it, ensuring the security of client funds and preventing unauthorized liquidations.
Currently, Grvt utilizes a full liquidation model. This means when a liquidation is triggered, the system takes over the entire position or account balance, depending on isolated or cross margin mode, and transfers the positions and remaining funds to the Grvt Insurance Fund (see What is the Grvt Insurance Fund?).
Triggers for Liquidation
The trigger for liquidation depends on whether you are using Cross Margin or Isolated Margin.
Liquidation for Cross Margin Positions
In Cross Margin mode, your entire cross account balance acts as collateral. Liquidation is triggered based on the health of your entire cross account.
The Grvt Risk system continuously computes the following:
Cross Account Equity: Represents the total value of the account if all open cross positions were closed at current Mark Prices.
Calculation:USDT Balance + Sum of Unrealized PnL on all open cross positions.
Cross Maintenance Margin Requirement (Cross MMR): Represents the minimum Cross Equity required to ensure the account's solvency.
Calculation:Sum of Maintenance Margin requirements for each cross position.(See the Maintenance Margin Rates table for rate details).
Trigger: When Cross Account Equity falls below the Cross MMR, the entire cross positions and balance are liquidated. All cross positions are closed, and the remaining Cross Account Equity is transferred to the Insurance Fund.
Liquidation for Isolated Margin Positions
In Isolated Margin mode, risk is confined to a specific position. Liquidation is triggered based on the health of that single position only.
The system computes the following for each isolated position:
Position Margin Balance: Represents the specific amount of collateral assigned to this position, adjusted for profit/loss.
Calculation:Allocated Margin Balance + Unrealized PnL of the position.
Position Maintenance Margin Requirement (Position MMR): Represents the minimum margin required to keep this specific position open.
Calculation:Position Value × Maintenance Margin Rate by tier - Maintenance Amount
Trigger: When Position Margin Balance falls below the Position MMR, that specific position will be liquidated.
Outcome: The position is fully closed. The allocated margin is lost.
Protection: Your main wallet balance and other positions remain unaffected.
Bankruptcy price
Liquidation orders are theoretically filled at the Bankruptcy Price. This is the hypothetical price at which the collateral (Cross Account Equity or Isolated Margin) would be exactly zero.
For Cross Margin: The price at which the Cross Account Equity becomes zero.
For Isolated Margin: The price at which the Allocated Margin for that position becomes zero.
In practice, the Insurance Fund takes over the position at the Bankruptcy Price.
If the market price is better than the Bankruptcy Price, the remaining value goes to the Insurance Fund.
If the market price is worse than the Bankruptcy Price, the Insurance Fund covers the deficit to prevent bad debt.
For more details about the calculation formula for the Bankruptcy Price, see the attached PDF: Liquidation_Limit_Price_Calculation.pdf.