With spot margin trading, users can trade with leverage and go short on spot markets by borrowing from other users (lenders) on BitMake, who are looking to earn yield on their assets.
Rates are determined by lenders on the platform and paid every hour. Lenders have the ability to call back their loans at any point in time and receive their funds in an hour.
Similar to futures, spot margin positions are subject to collateral requirements and liquidation rules.
To see current and historical lending rates, visit：Lending | Cryptocurrency Derivatives Exchange (bitmake.com)
How do you enable spot margin trading?
To enable spot margin, visit your Trade Account -Borrow, click on the Margin section and select “Enable Spot Margin Trading”. If you turn spot margin on, then your account will attempt to borrow any spot assets that it is short.
Keep in mind that with spot margin enabled, rather than selling your non-USD collateral whenever your USD balance dips below certain thresholds, your account will automatically borrow the negative USD balance via the spot margin market and pay the prevailing USD borrow rate. More details on this here.
What assets are available for borrowing/lending?
How BitMake automates borrowing
There are a number of different ways to implement margin trading and borrow/lending. BitMake’s is the most automatic in the industry, though the user still has full control over their borrowing and lending. Rather than requiring discrete actions to request borrows, receive them, move the funds, open/close positions, etc., the entire process is abstracted away into net balances.
As long as you have sufficient margin, you can borrow spot tokens simply by spending beyond your account’s balance of them.
So say that you have $50,000 (USD) in your account and nothing else. If you sold 1 BTC for $20,000 in the spot BTC/USD order book, your total balances would then be: +70,000 USD; -1 BTC. You didn’t have the BTC and so had to borrow it in order to sell it. BitMake does this automatically when you sell, sending an order to the funding book on your behalf to borrow 1 BTC.
You can even do this with withdrawals! If your account has 3 BTC and nothing else, you can request a withdrawal of 1 ETH (despite not having any ETH!). BitMake will automatically request a borrow for 1 ETH for you, and you can then withdraw that ETH. Note, however, that you cannot borrow to withdraw for greater size than is available and unused in the borrow-lending book!
So there’s no need to manage collateral vs margin positions vs withdraw able tokens vs margin trading vs spot trading. The same commands (buy/sell/deposit/withdraw) work normally and are allowed as long as your account has enough total collateral to support the necessary borrows.
Spot Margin Trading
Your spot margin positions are cross-margined with your futures positions; there is no separate spot margin requirement you have to monitor.
Generally, the way that futures margin works is that each contract has a margin requirement (initial margin fraction to open a position and maintenance margin fraction to avoid liquidation), and you need a total collateral value which meets those thresholds.
Spot margin is similar. The position size of a spot margin position is the notional size of any short (negative) balances you have. So for instance if you have + $65,000; -2 BTC; and BTC is trading at $20,000, then the size of your spot margin position is $40,000 (2 BTC * $20,000 per BTC). This is treated the same as if you had a $40,000 futures position on, and requires initial margin to increase and maintenance margin to avoid liquidation.
To lend an asset out, you specify the quantity you want to lend, and the minimum interest rate you’d require. If this loan ends up being borrowed (i.e. your interest rate is below the marginal rate), you will receive the marginal interest rate hourly. By default your specified parameters (amount to try to lend, minimum interest rate) will persist from hour to hour.
Lenders bear no counterparty risk: BitMake guarantees interest payments for however long your funds are borrowed, even if the borrower gets liquidated. Additionally, BitMake charges no fees to lenders. Interest rates are paid by borrowers to lenders in full.
Assets that you are lending are effectively locked, and cannot be withdrawn/sold/used as collateral/staked/etc. However, they can be used as maintenance margin to prevent liquidations.
If you choose to stop lending your coins and they were in fact being borrowed, you will stop earning interest on them at the end of the hour and they will be unlocked in 1 hours. If you were offering to lend your coins but they were not actually borrowed (because there was not sufficient demand at your minimum interest rate), you are free to use the coins and stop trying to lend at any point.
You can manage your loans at Lending | Cryptocurrency Derivatives Exchange (bitmake.com).
BitMake's risk engine will attempt to liquidate any users before they could get negative net account balance; using spot margin opens you up to liquidation risk. In general, BitMake and its backstop fund will attempt to protect other users against other accounts' bankruptcy risk.