Borrowing in spot mode allows traders to leverage their existing cryptocurrency holdings as collateral to access additional funds for trading. This powerful feature enables increased market exposure, but it also comes with specific rules, risk parameters, and validation mechanisms designed to maintain account stability and prevent excessive losses.
Whether you're looking to amplify your trading strategy or simply need short-term liquidity, understanding how spot borrowing works—especially the role of adjusted equity, discount rates, and margin requirements—is essential for effective risk management.
How Spot Borrowing Works
After transferring crypto assets into your trading account, you can use them as collateral to borrow funds and trade with leverage. You have two options:
- Manual borrowing: Initiate a loan before placing a trade.
- Auto-borrowing: Enable automatic borrowing when an order is filled.
All valuations during order validation and borrowing are conducted in USD. The platform uses discounted USD values of your crypto holdings—based on asset volatility and liquidity—to calculate available margin and enforce risk controls.
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Key Asset Metrics Explained
Understanding your account’s financial metrics is crucial for managing borrowings effectively. Here are the core terms:
Crypto-Level Fields
- Equity: Total balance of a specific cryptocurrency in your account.
- Available Balance: Amount of crypto free to use in spot or options (long) trading.
- In Use: Crypto currently locked in open orders or active trading bots.
- Borrowings: Total amount of a crypto you’ve borrowed, including accrued interest.
Account-Level Metrics
- Account Equity: Total fiat value of all cryptocurrencies held.
- Adjusted Equity: Discounted value of assets usable for margin, accounting for open order risks and fees.
- Frozen Margin: Fiat value reserved as collateral for active borrowings.
- Account Leverage: Effective leverage ratio calculated as Borrowings / Adjusted Equity.
- Maintenance Margin Ratio: A key risk indicator; calculated as Adjusted Equity divided by (Maintenance Margin + Liquidation Fees). If this drops below 100%, forced liquidation may occur.
These metrics dynamically update based on market movements and trading activity, making real-time monitoring vital.
Understanding Discount Rates
Cryptocurrency prices are volatile. To manage risk, the platform applies discount rates when converting crypto holdings into USD-equivalent margin value. These rates reflect each asset’s liquidity and price stability.
For example:
- High-liquidity assets like BTC or ETH might have a discount rate of 0.98.
- Less liquid tokens may have lower rates (e.g., 0.85), reducing their margin contribution.
This means that even if you hold $10,000 worth of BTC, only $9,800 (at 98% discount rate) counts toward your borrowing capacity.
👉 Learn how discount rates affect your borrowing power
Trading Rules and Borrowing Conditions
Several critical rules govern borrowing in spot mode:
- All crypto values are converted to USD using applicable discount rates to determine margin availability.
- If your adjusted equity is sufficient, you can sell assets even if your actual balance is low—the system assumes auto-borrowing will cover the shortfall.
- Interest on borrowed amounts accrues hourly.
- Each loan has an Initial Margin Requirement (IMR) and Maintenance Margin Requirement (MMR).
- Forced repayments—either user-triggered or platform-initiated—may occur if risk thresholds are breached.
Auto-Borrow Order Validation
An order with auto-borrow enabled is validated based on whether the adjusted equity covers the required frozen margin after the trade.
Case 1: Sufficient Adjusted Equity
You hold:
- 0.1 BTC ($60,000 each, 98% discount rate)
- 1 ETH ($3,000 each, 98% discount rate)
- 0 USDT
You place an auto-borrow order to sell 6,000 USDT at 60,000 BTC/USDT (2x leverage).
Adjusted Equity =
(0.1 × 60,000 × 0.98) + (1 × 3,000 × 0.98) − (6,000 × 0.1 × (1−0.98)) = 8,700 USD
Frozen Margin = 6,000 / 2 = 3,000 USD
Since adjusted equity > frozen margin, the order is approved.
Case 2: Insufficient Adjusted Equity
Same holdings, but now you attempt to sell an additional 12,000 USDT while 6,000 USDT is already pending.
Total frozen margin becomes:
3,000 + (12,000 / 2) = 9,000 USD
Adjusted equity recalculates to 8,460 USD, which is less than required.
→ The new order fails validation.
Manual Borrowing Validation
When borrowing manually, the maximum amount depends on:
- Available adjusted equity
- Account tier limits
- Crypto-specific position tiers
- Simple Earn Flexible pool constraints
Note: The calculation assumes 1x leverage during manual borrowing—even if your current leverage is higher.
Example: Successful Manual Borrow
Holdings:
- 0.1 BTC at $60,000 (98% discount rate)
- No USDT
Attempting to borrow 1,000 USDT at 2x leverage:
Adjusted Equity = 5,880 USD
Frozen Margin Needed = 500 USD
Result: Loan approved.
Example: Failed Manual Borrow
Same holdings, trying to borrow 12,000 USDT:
Frozen Margin Needed = 6,000 USD > Adjusted Equity (5,880 USD)
Result: Borrowing denied.
Risk Management Mechanisms
Order Cancellation Assessment
To avoid liquidation after order execution, the system proactively checks risk levels.
Trigger Condition:
When net assets fall below (Maintenance Margin + IMR of any open auto-borrow order)
Action:
All open orders are canceled automatically to reduce exposure and stabilize the maintenance margin ratio.
This preemptive step helps avoid sudden liquidations triggered by market volatility.
Forced Liquidation Process
Liquidation occurs when your maintenance margin ratio falls to or below 100%.
Warning Stage
- At 300% or lower, you receive a risk alert.
- This gives you time to deposit more collateral or repay part of the loan.
Liquidation Execution
- Same-Currency Repayment: If you borrowed BTC and hold BTC, the system first uses available balance to repay debt plus interest.
- Tiered Reduction: Excess borrowing beyond tier limits is progressively reduced until the ratio exceeds 100%.
- Full Liquidation: If tier reduction isn't enough, full forced liquidation occurs.
Real-World Scenario
- Max allowed BTC borrowing: equivalent to $1M USDT
- Actual borrowed: $1.1M USDT equivalent
- Maintenance margin ratio drops below 100%
System response: Partially liquidates to bring borrowing down to $1M threshold. Repeats until risk level normalizes.
Frequently Asked Questions (FAQ)
Q: What happens if I don’t have enough balance to cover a sell order?
A: If adjusted equity supports it, the system allows auto-borrowing to fulfill the order. Otherwise, the trade fails.
Q: How often is interest charged on borrowed assets?
A: Interest accrues and is deducted on an hourly basis from your account balance.
Q: Can I change my borrowing settings after placing an order?
A: Modifying an existing order converts it into an auto-borrow order and revalidates based on current adjusted equity.
Q: Why did my order get canceled unexpectedly?
A: Orders may be canceled automatically if your account approaches liquidation risk to protect your position.
Q: Are all cryptocurrencies eligible for borrowing as collateral?
A: Most major cryptos are supported, but eligibility and discount rates vary based on liquidity and risk profile.
Q: Is there a way to avoid forced liquidation?
A: Yes—monitor your maintenance margin ratio closely, reduce leverage, repay loans early, or add more collateral.
Borrowing in spot mode offers flexibility and enhanced trading potential—but requires disciplined risk management. By understanding how adjusted equity, discount rates, and margin ratios interact, traders can make informed decisions and avoid unexpected outcomes like order rejection or forced liquidation.
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Remember: While leveraged trading amplifies gains, it also magnifies losses. Always assess your financial situation before using borrowed funds. This guide is for informational purposes only and does not constitute financial advice.