Introduction to Hedging Service

1. What is hedging?

The hedging service launched by ViaBTC is a tool for mining pool users to hedge

price risks and lock profits in advance to obtain stable mining returns. Miners can

predict the output of mining in the coming period, and sell in advance at the current

price through the hedging service to lock in long-term mining profits; compared with

the hedging in the traditional financial market, ViaBTC Hedging Service meets more demands from miners with higher practicability. 

Suitable for: Miners with stable mining output but lacking experience in financial knowledge can use this tool to achieve asset hedging.

2. Characteristics of ViaBTC Hedging

 (1) More matchable: ViaBTC Hedging Service sets the maximum hedging amount according to the actual mining output of each user to ensure that the hedging amount matches the mining output;    

 (2) Fast & convenient: Use hedging coins as margin and settle in USDT;

 (3) Support auto repayment: After enabling the auto repayment, you can automatically transfer the daily mining output to the hedging account for repayment, saving the trouble of manual transfer.

3. Related concepts

• Hedging Account

ViaBTC Hedging Service uses an independent hedging account instead of a mining account. The hedging account includes two types of assets: hedging coin and settlement coin (USDT). Hedging assets should be transferred in or out by clicking “Transfer” manually. USDT assets in different hedging coins is independent. That is, for fund transfer, margin calculation, etc., USDT assets in different hedging coins cannot be mixed or added up together. 

Hedging service Is only available for ViaBTC user's main account.

• Hedging coins and settlement coin

When hedging a certain cryptocurrency, the cryptocurrency is called hedging coin. As all hedging coins are settled by USDT, USDT is named as settlement coin. There are 3 hedging coins supported by ViaBTC Hedging Service: BTC, BCH and LTC.

• Leverage

ViaBTC Hedging Service provides all hedging coins with the fixed 6X leverage ( fixed 20% initial margin ratio), and users are not allowed to adjust leverage by their own.

• Hedging period

The hedging business provided by ViaBTC does not have a specified expiration time and no delivery will occur. In the event that forced liquidation does not occur, you can decide whether or not to continue to hold the position according to your own situation.

• Daily Interest Fee

After a hedging order is executed, it is equivalent to borrowing a certain amount of the hedging currency from the system (borrowed amount = hedged amount - initial margin). The daily interest rate is 0.05%, and the settlement time is 00:00 (UTC+8) each day.

The daily interest fee is calculated in the hedging currency and is computed once daily (any period less than 24 hours is also counted as a full day). If the borrowed currency is repaid mid-term, the daily interest fee will be calculated based on the actual borrowed amount.

The daily interest fee is calculated on a simple interest basis. Upon repayment or termination of the order, the interest is repaid first, followed by the principal.

• Margin & Margin Rate

When you create a hedging order, Initial Margin = Hedging Amount / 6

Margin rate Includes Initial margin rate, alert margin rate, maintenance margin rate, etc. Margin rate is a reflection of the security situation of the user's current hedging order.

*lnitial Margin Rate= Total Net Assets in Hedging Account / To-be-repaid Amount * 100% = Initial Margin / (Hedging Amount- Initial Margin) * 100% = Initial Margin / (Initial Margin * 6-Initial Margin) * 100% = 20%

*Alert Margin Rate = Maintenance Margin by each gradients + 3%.  If Margin Rate is less than or equal to Alert Margin Rate, the system will send notifications to remind you to increase margin in hedging account for asset security reason. 

*Maintenance Margin Rate: If Margin Rate is less than or equal to Maintenance Margin Rate, the system will trigger a forced liquidation operation for your hedging order. ViaBTC Hedging Service sets Maintenance Margin Level System for different hedging amount and hedging coins.

• Maintenance Margin Level System

BTC

BCH

LTC

• Forced Liquidation

 If you cannot fulfill your Maintenance Margin requirement, your hedging positions will be liquidated (When Margin Rate ≤ Maintenance Margin Rate, the system will conduct forced liquidation).

• Index Price

Index Price is determined by the weighted prices from a selection of mainstream crypto exchanges. An anticipatory mechanism is at work to ensure Index Price swings within an acceptable range when a drastic fluctuation occurs in any of the exchanges. 

• Estimated Liquidation Price

Formula: Estimated Liquidation Price = Total USDT Assets / ( To-be-repaid Amount +Frozen Assets +To-be-repaid Amount * Maintenance Margin Rate -Total Hedging Assets)

Note: If a hedging account has a large hedging asset and the liquidation price is negative according to the above formula, the liquidation price will be displayed as "∞".