MCS | How Does The Liquidation Process Work?

7 months ago

Latest Post MCS | What Can You Buy With Bitcoin (BTC)? public

*This post has been written by Hedgehog, an MCS influencer and one of Korea's famous cryptocurrency key opinion leaders.


Greetings from MCS, the derivatives trading platform where traders ALWAYS come first.

When trading Bitcoin margin, these questions must have popped in your mind: "Does the exchange take all my liquidated position?", Will the exchange benefit from my liquidated positions?" and so on. In this post, I will answer these questions one by one.

1. If my position got liquidated, does the exchange benefit from it?

This is not correct, and the exchange benefits nothing from any liquidations within the exchange. In the Help Center of the MCS trading platform, liquidation is defined as follows:

"Liquidation is a device prepared to minimize damage to traders."

To completely understand the sentence above, you must first know that Bitcoin margin trading is a zero-sum game. When you realize profits, it means that someone has lost that much, and when you lose, it means that someone has made that much profit. So, if you lose as much as your position margin, it will not hurt other traders, but if you lose more than your position margin, this zero-sum game will collapse. Therefore, liquidation exists as a mechanism to prevent damage beyond the position margin. Since there is liquidation, you cannot lose more than your position margin, so you do not cause collateral damage to other traders.

When liquidation is triggered, the clearing house of the MCS trading platform automatically takes over the position subject to liquidation and then safely closes the position, and the exchange does not take any gain in this process to minimize traders who may lose money.

2. What happens to the liquidated positions?

When a position is liquidated, the position will disappear from the My Position List. This is because the clearing house of the exchange took over the position. The moment the liquidation is triggered, the clearing house of the MCS trading platform immediately takes over the position and makes an effort to close the position at a price above the bankruptcy price of the position. If the clearing house closes the position at a price equal to or higher than the bankruptcy price of the position, the remainder will be attributed to the insurance fund. Contract losses are primarily compensated by the insurance fund.


I am a Bitcoin margin trader, Hedgehog. Thank you for reading this post.


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Published 7 months ago