What is Cross Wallet?
To understand what cross wallet is, let’s revisit the concept of margin and what happens when a position is created. For creating a position, we need to put some our own money to create and maintain the leveraged position.
For eg: Jack places an order to create a BUY position for ETH. He places an order of 100 USD, with 25x Leverage. Based on mark price of ETH at that time, the quantity of the order and leverage, a “Margin” value is calculated for this position.
This margin indicates the amount that was put on hold from your USDT wallet to keep this position open. If you are not able to maintain this margin, your position will get liquidated.
Now, that we understand what margin means. Let’s see two different flavors of it:
In Isolated Margin mode , a dedicated margin balance from your USDT wallet is assigned to each position. This means that if the loss incurred by a specific position comes close to its assigned margin balance, the possibility of liquidation becomes a concern. This applies regardless of profits achieved in other positions or the presence of surplus funds in your USDT wallet. Notably, the potential loss is limited to the allocated margin for that position. For example, consider the example below where we have opened 3 positions in Isolated Margin Mode.
In this scenario, we have three positions in ISOLATED mode. One in BTC, ETH and DOGE. We can see that for each of these positions we have a Margin Balance (3.5, 3.90 and 4.016 respectively). Since these position are in Isolated mode it means the following:
- If my loss in ETH goes near 3.90, then my position will be liquidated even if i am making an overall profit across all my positions. To prevent liquidation, I need to add extra margin for ETH position
- My profit in BTC cannot be used to offset the margin requirements for my other open positions that are in loss
- The available balance in my USDT wallet cannot be used to offset the margin requirements for my other open positions that are in loss
- The maximum amount that I can lose in the BTC position is 3.5. Similarly, the maximum I can lose in ETH is 3.9 and 4.016 in DOGE
- Different positions have different margin ratios as the collateral amount and PnL in each position is different. Note that liquidation happens when margin ration hits 100%
In cross margin mode, your entire USDT wallet and is used to meet margin balance across all positions . This means that profit and loss from one cross margin position can be used to balance out the margin requirements of other cross margin position(s). In essence, your focus shifts to the cumulative margin needed to uphold your open positions or orders, and whether your overall USDT wallet (PnL adjusted) contains sufficient funds to meet this requirement. The specific margin prerequisites of individual positions become less significant.
Hence, if a position is running at a loss, the available balance in your USDT wallet (PnL adjusted) will be used to cover the losses, not just the margin dedicated to that specific position. In such a scenario, you can mitigate liquidation for that position. However, it's important to note that in the event of liquidation, the entirety of your USDT wallet is susceptible to loss.
Consider this scenario:
In this scenario, we have three positions in ISOLATED mode. One in DOGE, ETH and BTC. We can see that for each of these positions we have a Margin Balance (4.00, 3.94 and 3.5035 respectively). However, when you click on the ‘i’ icon next to it, you will see that this margin is part of your total Cross Wallet balance and is not dedicated to that position
An important thing to note here is that the Margin Ratio is same across all cross positions. This is by design. As your whole USDT wallet is used to margin requirements across all positions, the margin ratio is calculated as Total margin required to open all positions / Total USDT wallet balance (PnL Adjusted) This also showcases that in case of liquidation (when Margin Ratio hits 100%), your whole USDT wallet balance will be lost.
Cross wallet is simply a tool that allows you place orders and create positions in cross margin mode.
Why should you use it?
As discussed, cross wallet allows you to trade with leverage using your whole USDT wallet across all positions. This has the following advantages:
- Reduced risk of liquidation: If one position incurs losses, your USDT wallet balance (PnL adjusted) will be used to cover it. Thus, reducing the possibility of liquidation due to a single position’s loss
- Larger Portfolio sizes: Cross margin mode allows you to open larger positions compared to isolated margin mode since the entire account balance is used as collateral. This can potentially lead to greater profit opportunities.
- Less Monitoring: We saw that the margin ratio is the same for all cross-margin positions. You don’t need to monitor each position’s margin ratio separately.
However, this increased benefit comes with an increased risk. While in Isolated mode, the maximum amount you can lose is fixed for a particular position. In Cross mode, you can potentially lose all of your USDT wallet.
Hence, we advice caution when trading using the cross wallet functionality.
How to Use It?
- Visit app.density.exchange
- Select the Asset you want to trade
- Click on ISOLATED on the right side of the screen.
- Select the Margin Mode. Select CROSS. By Default, it is set on ISOLATED
- Click on Confirm
- The margin mode will now be updated to CROSS
- You can only place new orders for a specific trading pair within a chosen margin mode (CROSS or ISOLATED) if you currently have no active orders or positions associated with that same trading pair in the alternative margin mode (ISOLATED or CROSS).
- The default margin mode set for a trading pair is ISOLATED.
Frequently Asked Questions(FAQ)
Can I trade BTC/USDT on Density Exchange?
Yes, you can trade BTC/USDT (Bitcoin/Tether) on Density Exchange. They provide trading pairs for different cryptocurrencies, including popular pairs like BTC/USDT.
Does Density Exchange offer crypto derivatives trading?
Yes, Density Exchange offers crypto derivatives trading, allowing users to trade futures contracts and other derivatives based on various cryptocurrencies.
What are the best crypto trading apps in India?
Density Exchange is considered one of the best cryptocurrency exchanges in India. They offer a user-friendly app that allows you to trade cryptocurrencies, access real-time price data, and engage in derivatives trading.
How can I check the price of Bitcoin(BTC) in India on Density Exchange?
You can check the price of Bitcoin(BTC) in India on Density Exchange by visiting their website or using their app.
What are crypto futures in India?
Crypto futures in India are financial contracts that allow traders to speculate on the future price movements of cryptocurrencies like Bitcoin, Ethereum, etc. These contracts enable investors to profit from both rising and falling cryptocurrency prices.