Decoding the underlying financial philosophy of Bybit and Bitget

As derivatives exchanges following Binance, how do Bybit and Bitget fight their way out in the highly competitive and volatile perpetual contract battlefield?

Bybit has chosen an extremely capital-efficient architecture route, striving to build a "financial engine" that serves institutional-level strategies; while Bitget embraces high volatility sensitivity and competes for the minds of subjective traders and arbitrage quantitative teams with a more open, transparent and responsive mechanism.

Seemingly similar top-level algorithms can evolve completely different K-line behaviors - the real difference is hidden in every detail.

Under the "algorithmic order" of Binance, the industry leader, Bybit and Bitget did not blindly imitate, but in the structural institutional gray areas such as funding rates, mark prices, and forced liquidation processes, they explored different survival paths and strategic spaces with their own unique trading philosophies and financial mechanisms.

I. Index price algorithm: whose price is more "real"?

Bybit and Bitget both follow industry best practices, using quotes from multiple mainstream spot exchanges and using the volume-weighted average method (VWAP) to calculate index prices, aiming to build a fair price that reflects the broad market value of assets, thereby effectively resisting price anomalies caused by insufficient liquidity or malicious manipulation of a single exchange.

Bybit Mechanism

Bybit obtains spot prices from multiple mainstream exchanges and calculates the index by volume weighting. However, its specific data sources are not fully disclosed, and the platform also reserves the right to adjust the data source and its weight without prior notice in extreme market conditions. While this mechanism provides operational flexibility, it also constitutes a certain "information black box" for traders.

Bitget Mechanism

Bitget also uses the VWAP method, but its significant advantage is that it fully discloses all index component exchanges (such as Binance, Coinbase, OKX, etc.), providing traders, especially quantitative teams, with a highly transparent data source, which facilitates model verification and risk assessment.

Core Differences

• Transparency: Bitget provides full data sources for public disclosure, reducing the risk of "black box" and making it easier for traders to conduct modeling and backtesting; Bybit sacrifices a certain degree of transparency while maintaining platform flexibility, bringing "trust cost".

• Abnormal data processing mechanism: Bitget is more strict in handling abnormal data sources. Only when the price of a data source returns to the median ±2% range can it be re-included in the index calculation; in contrast, Bybit sets a tolerance of ±5%, which is more relaxed.

• Price smoothing mechanism (Bitget-specific): When the adjustment of index components may cause price jumps of more than 0.1%, Bitget activates the "smooth transition mechanism" to gradually replace the components to avoid price jumps caused by technical changes, thereby reducing the risk of forced liquidation caused by non-market factors. (But it is a problem when the altcoin fluctuates violently)

2. Mark price algorithm: How to resist market manipulation?

Bybit and Bitget both use the "Median-of-Three" method widely recognized in the industry to calculate the contract mark price. This method effectively resists the distortion of a single data source by taking the median of three independent price sources, fundamentally reducing the risk of manipulation behavior of "pulling/smashing to trigger forced liquidation".

Bybit Mechanism

Bybit selects three prices:

• Price 1 and Price 2: derived based on index price, funding rate and short-term basis;

• Price 3: the latest transaction price on the platform.

The system uses the median of the three as the mark price to effectively filter out extreme price fluctuations.

Bitget Mechanism

Similar to Bybit, Bitget also adopts the three-price median method and introduces three prices with basically the same structure. Although the naming and arrangement are slightly different, the essential logic is the same.

The real difference is not in the algorithm, but in the quality of the underlying data

Although the two are highly consistent in formula structure, the key to the final mark price performance is not the top-level algorithm design itself, but the way the input parameters are generated, especially whether the source of the index price is transparent, the calculation frequency and logic of the funding rate, and whether the basic data update mechanism is lagging.

These underlying factors are the core of determining whether the platform is "easy to be manipulated" or whether the "rationality of forced liquidation" is robust.

One more thing: the "Phantom P&L" phenomenon that follows the mark price deviation of the exchange

In a turbulent market, especially for small-cap altcoins, traders often encounter a confusing phenomenon:

Just after opening a position at the market price, the system immediately displays "unrealized loss" or "close to liquidation".

This is not a system vulnerability, but a result of the structural characteristics of the dual-price system:

• The opening price is calculated based on the latest transaction price;

• Unrealized profit and loss is calculated based on the mark price.

If the mark price is lower than the latest transaction price when the position is opened, the long position will instantly show a loss;

Conversely, the short position may also immediately enter the "false profit" state.

This kind of "phantom profit and loss" is particularly obvious when the market fluctuates violently, the exchange order book is shallow, and there is a short-term deviation between the index and the spot, which makes novice traders who are not familiar with the mechanism mistakenly believe that the system has a "malicious explosion".

III. Funding rate algorithm: static stability vs dynamic feedback

The funding rate is the core mechanism for anchoring the perpetual contract price and the spot price. Although Bybit and Bitget use the same top-level funding rate calculation formula, the definition of one of the key parameters is completely different, which reveals their fundamental philosophical differences in market regulation mechanisms.

Bybit Mechanism:

Bybit uses the standard "premium index + interest rate" formula. Among them, the key parameter "Impact Margin Amount" (IMN) used to measure market depth is a fixed USDT value statically configured for each contract. This value remains unchanged in any market environment.

Bitget Mechanism:

Bitget uses the same top-level formula as Bybit, but the calculation method of the impact margin amount (IMN) is completely different from Bybit.

Core Difference:

The calculation method of the Impact Margin Number (IMN) is the fundamental difference between the two in the funding rate mechanism. Bitget's IMN is dynamically calculated, and its formula is directly linked to the contract's risk parameter - the Minimum Maintenance Margin Rate (MMR). This means that the riskier the currency, the smaller its IMN, and the more sensitive the funding rate is to short-term order book imbalances.

• Bybit: Using static IMN settings, providing a unified and predictable market depth measurement standard for all contracts. Regardless of how market volatility changes, the order book depth used for premium index calculations remains consistent. The biggest advantage of this design is the reproducibility of the model and the stability of behavior. Especially among mainstream currencies, Bybit's funding rate performance is relatively smooth and easy to model, and can be regarded as a "stable but sluggish" architecture as a whole.

• Bitget: Adopts a dynamic IMN mechanism to explicitly incorporate market risk into the funding rate calculation logic. Its IMN value is directly linked to the minimum maintenance margin rate (MMR) of the contract. According to its formula, assets with higher risks and greater volatility usually have higher MMRs, and higher MMRs will be reversely mapped to smaller IMNs.

For example, the MMR of mainstream currencies is usually 0.5%, while the MMR of highly volatile altcoins may reach 2%. This means that on Bitget, the riskier the asset, the smaller the IMN value, and the calculation of the premium index will be based on shallower order book data, making it more sensitive to short-term liquidity imbalances.

Therefore, in high-risk altcoin transactions, Bitget's funding rate is extremely sensitive to small imbalances at the top of the order book (such as short-term buying or selling pressure). This "sensitive but more responsive" design makes Bitget's funding rate fluctuations on high-volatility contracts more drastic.

This also forms a powerful, adaptive risk adjustment feedback mechanism:

When the market sentiment of a certain altcoin is unilaterally tilted (such as long or short dominance), Bitget's funding rate will soar or fall faster and more dramatically than Bybit. This drastic change will quickly create a strong arbitrage incentive, leading reverse traders to enter the market, thereby more effectively pulling the contract price back to the index price level.

Fourth, forced liquidation mechanism: black box intelligence vs white box empowerment

Bybit and Bitget are generally similar in the underlying model of forced liquidation. Both adopt the "Systemic Absorption Liquidation Model", that is, when the user's position triggers the forced liquidation conditions, the exchange's "liquidation engine" will take over and handle it. However, in terms of execution process, user control, and associated risk management tools, the two show completely different risk control philosophies.

The basic logic of this type of liquidation mechanism is as follows:

When the forced liquidation price is triggered, the user's position will be taken over by the system and internally settled at the "bankruptcy price" (i.e., liquidation price). This means that the user's maximum loss is theoretically locked in, and there is no need to bear the risk of subsequent slippage.

It is worth noting that the bankruptcy price is usually worse than the forced liquidation price: the system always triggers liquidation at the forced liquidation price, but the execution price is the bankruptcy price. For example, if the forced liquidation price is 1000 and the bankruptcy price is 980, then once the position is forced to be liquidated, it will be settled at the price of 980.

Key Tips: Since forced liquidation is based on the bankruptcy price, it is necessary to set a reasonable stop loss point when opening a position to avoid it.

The liquidation engine will hold the "internalized" position and assume the obligation to actually close it in the market. If the liquidation transaction price is worse than the bankruptcy price, the difference will be made up by the insurance fund; if the transaction is better than the bankruptcy price, the surplus will be injected into the insurance fund.

Bybit Mechanism:

Bybit's Unified Trading Account System (UTA), especially in the Portfolio Margin mode, shows extremely high complexity and technological advancement. The system can automatically identify and evaluate the multi-asset net risk exposure in the entire account, such as identifying the hedging structure between spot BTC longs and perpetual shorts, thereby reducing margin requirements and releasing available funds. This design greatly improves the efficiency of capital utilization, especially in line with the high capital efficiency requirements of traders using multiple positions and multiple strategies.

However, this complexity also means that once the account is close to the edge of forced liquidation, the system will execute the "optimal solution" processing strategy based on its internal algorithm model. Bybit's system logic reflects a "paternalistic" risk management concept.

Bitget mechanism:

Bitget's forced liquidation mechanism is based on the core principle of "predictability and controllability". The system also uses the account's minimum maintenance margin rate (MMR) reaching 100% as the forced liquidation trigger standard. However, its forced liquidation process has clear execution steps, such as: canceling all orders first, then partially reducing positions, and finally closing positions. Users can clearly predict every operation link.

Whether it is a position-by-position or full-position mode, Bitget clearly stipulates that when MMR reaches 100%, forced liquidation is triggered. At the same time, the platform provides a set of fixed-order processing procedures, based on which traders can establish clear risk expectations and risk control models.

In addition, Bitget also provides a tool called "MMR Stop Loss", which allows users to preset risk thresholds (such as 75%, 80%), automatically reduce positions or stop losses before forced liquidation occurs, so as to actively manage their own risks.

Core difference:

• Predictability: Bitget's forced liquidation mechanism is a "white box model" with clear processes and fixed order, which is easy to model and predict; while Bybit's UTA forced liquidation mechanism is a "black box model", and users cannot know which assets the system will prioritize, sacrificing predictability in exchange for the optimal solution at the system level.

• User control: Bitget's "MMR stop loss" tool returns risk control to users, which is an "empowering" risk management concept; Bybit's liquidation mechanism emphasizes system algorithm dominance, which is a "paternalistic" design.

• Capital efficiency: Bybit's UTA, especially the portfolio margin system, can identify cross-asset hedging structures, thereby significantly reducing margin requirements, with higher capital efficiency than Bitget, suitable for institutions and high-frequency teams.

• ADL trigger conditions: Bitget's automatic deleveraging (ADL) mechanism is more sensitive - in addition to the exhaustion of insurance funds, if its insurance fund falls by more than 30% compared to its historical peak, it will also trigger ADL. Bybit only initiates ADL after the insurance fund is exhausted.

Postscript: Strategy selection under different mechanisms

There is no absolute difference between the mechanism design of Bybit and Bitget, but each is adapted to completely different trader portraits and strategy needs. :

Bybit has devoted all its efforts to build an efficient, powerful but relatively opaque system that serves complex strategies and high-frequency capital; while Bitget has chosen a completely different path to create an "empowering platform" that is more open, predictable, volatility-sensitive, and respects the user's independent decision-making power.

Understanding the underlying financial philosophy and institutional logic behind these platforms is the key for every trader, arbitrageur, and institution to make the best strategic choice.

Know what it is and why it is.

Let us always move forward with a heart of awe for the market.