Analysis of Gate Contract Mark Price Mechanism: How to Avoid Abnormal Liquidations?

When the latest mark price deviates significantly from the average of the past few minutes, the mark price will pause updates and remain at the previous mark price until the normally calculated mark price returns to a reasonable level. This is Gate’s instant volatility protection mechanism for mark prices, designed to prevent liquidations caused by malicious market manipulation and abnormal fluctuations.

Core Risks in Contract Trading: Market Manipulation and Abnormal Volatility

In cryptocurrency contract trading, the greatest risk often does not stem from misjudging trends, but from forced liquidations triggered by sudden abnormal market swings or malicious manipulation.

A brief but intense price spike can wipe out countless high-leverage positions within seconds, even if the long-term trend remains unchanged.

Traditional liquidation mechanisms rely on the latest market transaction prices, making traders highly vulnerable to abnormal market fluctuations. When an exchange experiences extreme buy or sell orders or liquidity suddenly dries up, prices may temporarily deviate from fair value, enough to trigger mass liquidations and cause chain reactions.

This vulnerability of market structure was vividly demonstrated during the crypto market volatility in July 2025. Data shows that within 24 hours, total liquidations across the network reached approximately $250 million, affecting over 93,000 investors.

To address this industry pain point, Gate introduced an intelligent risk control system based on the mark price, aiming to fundamentally reduce irrational liquidations caused by short-term market anomalies.

Mark Price: A Fair Value Benchmark Isolating Market Noise

The mark price is a key reference used in Gate contract trading to calculate unrealized profit and loss and determine margin calls. Unlike the rapidly changing latest transaction price, it is a filtered indicator of fair value.

Its core function is to isolate short-term market noise and reflect the true value of the asset, preventing misjudgments caused by abnormal quotes on a single exchange or insufficient market depth.

The calculation of the mark price is a precise process that considers multiple factors such as the index price, funding rate, and market basis.

Specifically, Gate’s mark price is the median of these three values:

• Price 1 = Index Price × (1 + Funding Rate Basis)
• Price 2 = Spot Index + Moving Average Basis
• The latest transaction price

The moving average basis is obtained by averaging the basis calculated per second over a certain period (usually 5 minutes). The platform adjusts the sampling window flexibly based on market conditions.

Multiple Layers of Protection: How Gate Builds a Safety Net for Mark Prices

Beyond the basic calculation model, Gate has established a dynamic defense system to handle extreme situations, ensuring the stability and fairness of the mark price.

The instant volatility protection mechanism is the first line of defense. When the system detects that the latest mark price deviates significantly from the average of the past few minutes, it immediately pauses updates and maintains the previous valid price. This acts like a “stabilizer” for the mark price, shielding it from being manipulated or affected by liquidity droughts.

The price circuit breaker for new contracts is a special safeguard during the initial market launch. For certain newly listed contracts, if within the first hour the price surges more than tenfold relative to the opening average, the mark price will enter a “circuit breaker” state and halt updates.

During this period, users can only reduce, not increase, their positions. This cooling-off period helps prevent irrational market behavior and avoids large-scale liquidations caused by speculative hype.

Additionally, Gate’s tiered liquidation mechanism works in tandem with the mark price to further reduce chain liquidation risks. When a position triggers liquidation, if the position size is large, the system will not liquidate everything at once. Instead, it prioritizes partial liquidations exceeding risk limits, gradually lowering leverage to ease margin pressure.

These mechanisms work together to form a comprehensive risk control loop, covering price discovery, anomaly filtering, and orderly liquidation.

Trader Guide: Managing Risk on Gate Using the Mark Price

Understanding the mark price mechanism allows traders to proactively manage their contract positions. On Gate’s trading interface, key information such as the liquidation price and risk level is calculated in real-time based on the mark price. This provides the most direct insight into your position’s health.

First, develop the habit of judging liquidation risk based on the mark price rather than the latest transaction price. During market volatility, the two can diverge significantly. Monitoring the mark price’s trend helps you make more rational decisions and avoid panic-driven actions.

Second, make good use of the platform’s risk management tools, such as:

• Setting stop-loss orders: The most proactive and effective way to prevent liquidation. You can set your stop-loss price below the liquidation price derived from the mark price, ensuring you exit before forced liquidation occurs.
• Using isolated margin mode: Unlike cross margin, isolated margin limits the risk of a single position from affecting others. Even if you make a wrong call on one side, the risk remains contained.
• Adding margin timely: In isolated mode, adding margin to a risky position can raise the safety buffer and push the liquidation price further away from the current mark price.

Finally, keep leverage at a moderate level. Leverage is a double-edged sword; while it amplifies gains, it also sharply increases risk exposure. In the volatile crypto markets, using 3-5x or lower leverage provides a larger buffer against price swings and significantly reduces the chance of liquidation.

Summary

When Bitcoin’s price suddenly drops to $50,000 on a small exchange, traders on Gate may remain unaware. Their liquidation thresholds are steadily maintained along the mark price track, which is supported by dozens of market data sources and complex algorithms. That abnormal $50,000 quote has already been automatically filtered out by the system’s volatility protection mechanisms.

The mark price acts like an invisible seawall, carving out a relatively stable decision-making zone amid the turbulent waters of the crypto market.