How to Avoid Abnormal Liquidations at Mark Price? An In-Depth Analysis of Gate's Contract Risk Control Mechanism

In cryptocurrency futures trading, the real nightmare is often not misreading the direction, but being right about the trend and dying at the moment of “price stabbing.” A sudden malicious sell-off or liquidity exhaustion can wipe out high-leverage positions in seconds. Data shows that during a market fluctuation in July 2025, the total liquidation amount across the entire network within 24 hours reached approximately $250 million, affecting over 93,000 investors.

To address this industry pain point, Gate has built an intelligent risk control system centered around the mark price. This article will analyze how Gate uses this mechanism to create a “breakwater” for traders, isolating market noise from your position safety.

Why is relying solely on the latest transaction price dangerous?

In traditional futures trading, forced liquidation is usually based on the latest market transaction price. This price is generated by matching immediate buy and sell orders on the order book and is highly susceptible to market manipulation. For example, large traders might exploit low-liquidity periods by placing big market orders to “stab” the market, causing many long positions to hit liquidation prices.

The vulnerability of this pricing logic lies in tying the fate of positions to instantaneous, potentially distorted trades.

Mark Price: Gate’s “Fair Value Benchmark” in Risk Control

Gate uses a different logic for the mark price. It is not dependent on the instantaneous transaction price from a single exchange but is a filtered fair value indicator. Gate uses it to calculate unrealized profit and loss and to determine forced liquidation, aiming to isolate short-term market noise.

How Gate calculates the mark price

According to Gate’s official documentation and blog, the rigor of its mark price is reflected in its calculation formula. The system takes the median of the following three values as the final mark price:

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

This “median” algorithm, combined with moving averages of the basis over a period, effectively smooths out sharp fluctuations from any single data source.

Depth protection: How does Gate operate during extreme market conditions?

Relying solely on the formula isn’t enough. Gate has equipped the mark price with multiple dynamic defenses.

Instant volatility protection

This is Gate’s first line of defense. When the system detects that the latest calculated mark price deviates significantly from the average of the past few minutes, the mark price will pause updates and hold at the last valid price until the price returns to a reasonable level. It’s like installing a “stabilizer” on the mark price to prevent it from being hijacked by malicious, rapid manipulations.

Tiered liquidation: avoiding total wipeout from a single error

Even if the mark price hits risk thresholds, Gate has a buffer zone. Unlike many platforms that liquidate entire positions at once, Gate employs a tiered liquidation mechanism.

When the risk ratio of a large position rises, the system does not immediately execute a “death sentence.” Instead, it prioritizes liquidating the portion exceeding the risk limit (e.g., 10%–20%). This often suffices to bring the margin ratio back to a safe level, preserving your main position. According to Gate’s official data, this mechanism reduces the user wipeout rate in a single black swan event by over 60%.

Price circuit breaker for new contracts

For newly launched contracts, if within the first hour the price surges more than 10 times the opening average, the mark price will enter a “circuit breaker” state and halt updates. During this period, users can only reduce their positions, not add to them, effectively cooling market irrationality.

Practical tips for traders: managing your risk on Gate

Once you understand the mark price mechanism, you can proactively adjust your strategies:

• Pay attention to liquidation price benchmarks: On Gate’s trading interface, liquidation prices and risk levels are calculated based on the real-time mark price. Use these to assess risk rather than reacting solely to short-term market fluctuations.
• Use spread protection: When placing take-profit or stop-loss orders, enable “spread protection.” If triggered, if the latest transaction price and the mark price differ too much, the order will be automatically rejected, preventing you from being forced out at abnormal levels.
• Maintain moderate leverage and isolation: In highly volatile markets, using 3–5x or lower leverage provides a larger buffer. Also, consider using isolated margin mode or Gate’s “sub-accounts” feature to separate high-risk strategies from long-term holdings.

Summary

When Bitcoin suddenly drops to $50,000 on a small exchange, Gate traders might remain unaware. Because their liquidation thresholds are based on the stable, multi-source, algorithmically derived mark price, not the fleeting market price.

Through the mark price and a series of risk control mechanisms, Gate has turned the slogan of “prevent abnormal liquidations” into a practical technical solution. For traders aiming for long-term survival in the crypto market, understanding and leveraging this system is a crucial step toward professional trading.