As the derivatives exchange that follows Binance closely, how do Bybit and Bitget break through in the highly competitive and volatile perpetual contract battlefield?
Bybit has chosen an architecture route of extreme capital efficiency, striving to build a 'financial engine' that serves institutional-level strategies; while Bitget embraces high volatility sensitivity, leveraging a more open, transparent, and responsive mechanism to capture the mindset of discretionary traders and arbitrage quantitative teams.
Seemingly similar top-level algorithms can evolve into completely different K-line behaviors - the real differences lie in every detail.
Under the 'algorithmic order' of industry leader Binance, Bybit and Bitget have not simply imitated but have explored different survival paths and strategic spaces with their unique trading philosophies and financial mechanisms in the structural gray areas of funding rates, mark prices, and liquidation processes.
I. Index price algorithm: Whose price is more 'real'?
Both Bybit and Bitget follow industry best practices, utilizing quotes from multiple mainstream spot exchanges and calculating index prices through the volume-weighted average price (VWAP) method, aiming to construct a fair price that reflects the broad market value of assets, effectively resisting price anomalies caused by insufficient liquidity or malicious manipulation on a single exchange.
Bybit Mechanism
Bybit obtains spot prices from multiple mainstream exchanges and calculates the index using volume-weighted averages. However, its specific data sources are not fully disclosed, and the platform reserves the right to adjust data sources and their weights without prior notice in extreme market conditions. This mechanism provides operational flexibility while also creating a certain 'information black box' for traders.
Bitget Mechanism
Bitget also uses the VWAP method, but its significant advantage lies in the complete public disclosure of all index component exchanges (such as Binance, Coinbase, OKX, etc.), providing a high degree of transparency for traders, especially for quantitative teams, facilitating model validation and risk assessment.
Core Differences
Transparency: Bitget provides full data source disclosure, reducing 'black box' risks, making it easier for traders to model and backtest; Bybit, while maintaining platform flexibility, sacrifices some transparency, leading to 'trust costs'.
Abnormal data handling mechanism: Bitget has stricter abnormal data source handling, only reintegrating a data source into index calculations when its price returns to within the ±2% range of the median; in contrast, Bybit's tolerance is set at ±5%, which is more lenient.
Price smoothing mechanism (unique to Bitget): When adjustments to index components may cause price fluctuations exceeding 0.1%, Bitget activates a 'smoothing transition mechanism' to gradually replace components, avoiding price spikes caused by technical changes, thereby reducing the risk of liquidation triggered by non-market factors. (However, this can be a problem during extreme volatility in altcoins.)
II. Mark price algorithm: How to resist market manipulation?
Both Bybit and Bitget use the widely recognized 'Median-of-Three' method to calculate contract mark prices. This method effectively mitigates distortion from a single data source by taking the median of three independent price sources, fundamentally reducing the risk of manipulation that triggers liquidation through 'pump and dump' behavior.
Bybit Mechanism
Bybit selects three prices:
Price 1 and Price 2: Derived from index prices, funding rates, and short-term basis, etc.;
Price 3: The latest transaction price within the platform.
The system uses the median of the three as the mark price, effectively filtering extreme price fluctuations.
Bitget Mechanism
Like Bybit, Bitget also uses the median-of-three method and introduces three price elements with structurally similar basics. Although the naming and arrangement differ slightly, the underlying logic remains consistent.
The substantive difference lies not in the algorithm, but in the underlying data quality.
Although both have a highly consistent formula structure, the key to the final mark price performance lies not in the top-level algorithm design itself, but in the way input parameters are generated, especially including: whether the index price source 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 determinants of whether a platform is 'easily manipulable' or whether the 'rationality of liquidation' is robust.
A word more: The phenomenon of 'phantom profit and loss' deviating from the exchange's mark price
In extreme market conditions, especially in low market cap altcoins, traders often encounter a perplexing phenomenon:
When opening a position at market price, the system immediately displays 'unrealized loss' or 'approaching liquidation'.
This is not a system flaw, but rather a structural feature of the dual price system:
Opening price is based on the latest transaction price;
Unrealized profit and loss are calculated based on the mark price.
If the mark price is lower than the latest transaction price when opening a position, the long position will instantly show a loss;
Conversely, a short position may also immediately enter a 'false profit' state.
This kind of 'phantom profit and loss' is particularly evident during violent fluctuations, in shallow order books, and during short-term deviations between index and spot prices, leading inexperienced traders unfamiliar with the mechanism to mistakenly believe that there is 'malicious liquidation' in the system.
III. Funding rate algorithm: Static stability vs dynamic feedback.
The funding rate is the core mechanism anchoring perpetual contract prices to spot prices. Although Bybit and Bitget use the same top-level funding rate calculation formula, the definition of one key parameter differs significantly, revealing their fundamental philosophical differences in market adjustment mechanisms.
Bybit Mechanism:
Bybit uses a standard 'premium index + interest rate' formula. Here, 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 under any market conditions.
Bitget Mechanism:
Bitget uses the same top-level formula as Bybit, but the method for calculating the impact margin amount (IMN) differs completely from Bybit.
Core Difference:
The method of calculating the impact margin amount (IMN) is a fundamental difference in the funding rate mechanisms of the two. Bitget's IMN is dynamically calculated, directly linked to the contract's risk parameter - minimum maintenance margin rate (MMR). This means that for higher-risk cryptocurrencies, their IMN is smaller, making the funding rate more sensitive to short-term order book imbalances.
Bybit: Uses a static IMN setting to provide a uniform and predictable market depth measurement standard for all contracts. Regardless of market volatility, the order book depth used for premium index calculation remains consistent. The main advantage of this design is model reproducibility and behavioral stability. Especially among mainstream cryptocurrencies, Bybit's funding rate is relatively smooth and easy to model, generally considered a 'stable but sluggish' architecture.
Bitget: Utilizes a dynamic IMN mechanism that explicitly incorporates market risk into the funding rate calculation logic. Its IMN value is directly linked to the contract's minimum maintenance margin rate (MMR). According to its formula, assets with higher risk and greater volatility typically set a higher MMR, which inversely maps to a smaller IMN.
For example, the MMR of mainstream coins is typically 0.5%, while the MMR of highly volatile altcoins may reach 2%. This means that on Bitget, the higher the risk of 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.
Thus, in high-risk altcoin trading, Bitget's funding rate exhibits high sensitivity to minor imbalances at the top of the order book (such as transient buying or selling pressure). This 'sensitive but more responsive' design results in more drastic fluctuations in funding rates for high-volatility contracts on Bitget.
This also forms a powerful, adaptive risk adjustment feedback mechanism:
When sentiment in a particular altcoin market becomes one-sided (such as favoring longs or shorts), Bitget's funding rate will spike or drop more rapidly and sharply than Bybit's. Such drastic changes will quickly create strong arbitrage incentives, drawing in contrarian traders and more effectively pulling contract prices back to index price levels.
IV. Forced liquidation mechanism: Black box intelligence vs white box empowerment
Bybit and Bitget's underlying models for liquidation are generally similar, both employing a 'systemic absorption liquidation model' (Systemic Absorption Liquidation Model), meaning once a user’s position triggers liquidation conditions, the exchange's 'liquidation engine' takes over and processes it. However, in terms of execution processes, user control, and associated risk management tools, the two exhibit distinctly different risk control philosophies.
The basic logic of such liquidation mechanisms is as follows:
Once the 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, without having to bear subsequent slippage risks.
It is noteworthy that the bankruptcy price is usually worse than the liquidation price: the system always triggers liquidation at the liquidation price, but the execution price is the bankruptcy price. For example, if the liquidation price is 1000 and the bankruptcy price is 980, once the position is liquidated, it will be settled at the price of 980.
Key reminder: Since liquidation occurs at the bankruptcy price, it is essential to set a reasonable stop-loss when opening a position to avoid this.
The liquidation engine will hold the position to be 'internalized' and bear the obligation to liquidate it in the market. If the liquidation transaction price is worse than the bankruptcy price, the difference will be covered 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, exhibits high complexity and technical sophistication. The system can automatically identify and assess the net risk exposure of multiple assets within the entire account, such as recognizing the hedging structure between long spot BTC and short perpetual contracts, thereby reducing margin requirements and releasing available funds. This design significantly enhances capital utilization efficiency, particularly meeting the high demands of traders using multiple positions and strategies for capital efficiency.
However, this complexity also means that once an account approaches the liquidation edge, the system will execute an 'optimal solution' handling strategy based on its internal algorithm model. Bybit's system logic reflects a 'paternalistic' risk management philosophy.
Bitget Mechanism:
Bitget's liquidation mechanism is centered around the principles of 'predictability and controllability'. The system also uses the account's minimum maintenance margin rate (MMR) reaching 100% as the trigger standard for liquidation. However, its liquidation process has clear execution steps, such as: first cancel all orders, then partially reduce positions, and finally fully liquidate, allowing users to clearly foresee each operational step.
Whether in isolated or full margin mode, Bitget clearly states: when MMR reaches 100%, liquidation is triggered. At the same time, the platform provides a complete set of fixed-order processing procedures, allowing traders to establish clear risk expectations and risk control models.
In addition, Bitget also offers a tool called 'MMR stop-loss', allowing users to preset risk thresholds (such as 75%, 80%) to automatically reduce positions or stop losses before liquidation occurs, thus actively managing their own risks.
Core Difference:
Predictability: Bitget's liquidation mechanism is a 'white-box model' with a clear process and fixed order, making it easy to model and predict; while Bybit's UTA liquidation mechanism is a 'black-box model', where users cannot know which assets the system will prioritize for liquidation, sacrificing predictability for an optimal solution at the system level.
User empowerment: Bitget's 'MMR stop-loss' tool returns risk control to the user, embodying an 'empowerment' risk management philosophy; Bybit's liquidation mechanism emphasizes a system algorithm-led approach, resembling a 'paternalistic' design.
Capital efficiency: Bybit's UTA, especially the portfolio margin system, can identify cross-asset hedging structures, significantly reducing margin requirements, providing higher capital efficiency than Bitget, suitable for institutions and high-frequency teams.
ADL trigger conditions: Bitget's automatic position reduction (ADL) mechanism is more sensitive - if the insurance fund drops more than 30% compared to the historical peak, it will also trigger ADL, in addition to the exhaustion of the insurance fund. Bybit only initiates ADL after the insurance fund is exhausted.
Final note: Strategy choices under different mechanisms.
There is no absolute superiority in the mechanism design between Bybit and Bitget; they are adapted to completely different trader profiles and strategy needs.
Bybit has made every effort to build an efficient, powerful but relatively opaque system, serving complex strategies and high-frequency capital; while Bitget has chosen a completely different path, creating a more open, predictable, volatility-sensitive platform that respects user autonomy in decision-making.
Understanding the underlying financial philosophy and institutional logic behind these platforms is key for every trader, arbitrageur, and institution to make optimal strategic choices.
Knowing what it is and why it is.
Let us always move forward with a heart that respects the market.
