What is Dual Price Mechanism and How Does It Work?

Bitflex uses dual price mechanism to avoid liquidations and prevent market manipulations. We allow our traders to open positions based on index price as well as last traded price. With this mechanism, traders can keep a close eye on their positions and monitor the difference between index price and last traded price to avoid unexpected losses.

It creates a just and fair trading environment for everyone, boosting traders’ confidence and avoid them from losing their hard earned money.

Index Price

The index price of a perpetual contract is its average price on major cryptocurrency exchanges. You can find more about how to check the index price of an asset here “How Do I Check the Index Price?”

Last Traded Price

On the other hand, the last traded price is the current price of a perpetual contract. So, it not necessarily the same as the index price or the mark price. The last traded price of all assets are tied to its spot price on major exchanges using the funding mechanism. As soon as the price deviates from Spot, traders are incentivized to trade against it and earn funding rewards.

For example, if the last traded price of an assets is greater than the spot price, traders are incentivized to open short positions as longs pay shorts. It anchors the price of a perpetual contract back to its spot price.

Similarly, if the last traded price of an asset is less than its spot price, traders are incentivized to open long positions as shorts pay longs. Once again, it anchors the price of a perpetual contract back to its spot price.