On Dec. 4, between 2:39:30AM and 2:39:35AM UTC, the Bybit ETHUSD Perpetual Contract experienced a wick that brought the Last Traded Price to as low as 504 — a 105 or 17% fall from to the minute’s open price of 609. The Mark Price that drives the liquidation engine stood firm. The Bybit team acted swiftly to address the issue and forestall further irregularities, and would now like to report the following:
No liquidations happened as a result of the wick, as Bybit employs a Dual-Price Mechanism that reflects the real-time spot price on major exchanges to prevent liquidations from market manipulation; but a multitude of Conditional Orders (including TP/SL orders) set to Last Traded Price were triggered in a chain reaction following the price drop brought on by large short orders.
To prevent such an incident from happening again, we are taking a tripartite approach — Bybit will implement a better price protection mechanism, introduce a market maker incentive program, and better explain the logic behind different order types so traders are able to make more informed decisions.
Price Protection Mechanism
The Bybit team is working hard to implement a better price protection mechanism to preclude such incidents in the future. One measure is to have a price protection band around the fair market price. Orders will not be executed at prices that deviate beyond the price protection band.
Market Maker Incentive Program
Bybit will launch a market maker incentive program to help increase liquidity, improve market depth and prevent large discrepancies between Last Traded Price and Mark Price.
Better Inform Bybit Traders
Bybit will also endeavor to better explain the logic behind different order types and trigger prices for Take Profit / Stop Loss to help users make more informed trading decisions. This enables users to better utilize the Mark Price/Index Price as Trigger-By Price to trigger Stop Loss, which mitigates the effect of adverse movement on the Last Traded Price.
In the meantime, we will be reaching out to those impacted and presenting them with a reimbursement plan based on the price difference between the fair market price at the time of this incident and the price of the executed orders.
Bybit is committed to creating a fair, transparent and efficient trading environment. We will learn from this incident and work harder in our quest of delivering the best, safest and fairest trading experience for our users, even as we continue to listen, care and improve. Please do not hesitate to reach out to our 24/7 multi-language customer support should you have further queries.