Dear BitDa User,
Why do we implement the ADL (Automatic Deleveraging) mechanism?
ADL, or Automatic Position Liquidation, is a mechanism triggered during extreme market conditions or force majeure events that cause the risk reserve fund to become insufficient or deplete rapidly. In such cases, to control the overall risk on the platform, a forced liquidation of the counterparty's position is carried out. Unlike the profit-sharing mechanism, which affects all profitable users, the ADL mechanism only impacts some profitable users.
Forced liquidation of a counterparty's position only occurs when the risk protection fund is unable to take over the positions of users undergoing liquidation. BitDa strives to avoid such scenarios by implementing methods like "Fill and Kill" to minimize the impact of counterparty liquidations. However, due to the high volatility of the cryptocurrency market and the high leverage used in futures trading, these situations may still occur. To ensure the best possible user experience, we do everything we can to reduce the likelihood of such events.
When a user is forcibly liquidated, their remaining position is taken over by the forced liquidation system. If the position cannot be closed on the market and the mark price reaches the bankruptcy price, the system will initiate a forced liquidation of users holding opposite positions—that is, counterparties with opposing positions will be liquidated.
This is a very low-probability event. The ADL mechanism is a standard configuration, and both Binance and Huobi exchanges have similar automatic liquidation mechanisms.
For more information, please refer to the relevant documentation on the Automatic Position Liquidation (ADL) Mechanism from Binance and Huobi.
Huobi
Binance
Bitget
OKX