Liquidity Pool

How does the liquidity pool work?

The liquidity pool is a common pool of BTC that is funded by trader losses and is used to pay out trader profits.

  • When you close a position at a loss, your loss amount is added to the liquidity pool.

  • When you close a position in profit, your profit amount is paid from the liquidity pool.

The current liquidity pool balance is around 2150 BTC.

Settlement

At 12:00 UTC every day, WCX nets all the profits and losses that occurred over the past 24 hours.

  • If profits minus losses < 0.5% of the liquidity pool, the liquidity pool covers the profit of winning traders.

  • If profits minus losses > 0.5% of the liquidity pool, a Socialized Profit Adjustment (SPA) occurs for winning traders.

Example: losses exceed profits

  • Total profits across all winning traders: 450 BTC

  • Total losses across all losing traders: 500 BTC

  • Liquidity pool: 1,000 BTC

Since losses exceed profits, winning traders are paid for by losing traders. Regular settlement occurs.

Settlement does not affect your open positions or orders. You can keep them open for as long as you want.

Example: profits exceed losses, but under the 0.5% liquidity pool threshold

  • Total profits across all winning traders: 202 BTC

  • Total losses across all losing traders: 200 BTC

  • Liquidity pool: 1,000 BTC. 0.5% of liquidity pool = 5 BTC.

Profits exceed losses, but winning traders can be paid using the liquidity pool (202 - 200 = 2 BTC, which is below the 0.5% liquidity pool threshold). Regular settlement occurs.

Example: profits exceed losses + 0.5% liquidity pool threshold

  • Total profits across all winning traders: 510 BTC

  • Total losses across all losing traders: 500 BTC

  • Liquidity pool: 1,000 BTC. 0.5% of liquidity pool = 5 BTC.

Profits exceed losses and cannot be fully covered with the 0.5% threshold of the liquidity pool. Socialized Profit Adjustment (SPA) occurs on the excess profit of 5 BTC (510 - 500 - 5).

Socialized Profit Adjustment (SPA)

Socialized Profit Adjustment (SPA) is a very rare event that occurs when winning trader profits for the day exceed all the losing trader losses for the day plus 0.5% of the liquidity pool.

As of this writing, SPA has never occurred. The process remains in place to protect the platform from high risk scenarios, such as a single trader consuming the liquidity pool (which would put all traders at risk).

  • SPA exists in one form or another on all high leverage derivatives platforms. It's not unique to WCX.

  • SPA is applied automatically without intervention from WCX.

  • SPA can never result in a loss. It's simply an adjustment of profit. SPA is applied based on your day's profit relative to the total day's profit across all winning traders.

Example

  • Total profits across all winning traders: 510 BTC

  • Total losses across all losing traders: 500 BTC

  • Liquidity pool: 1,000 BTC. 0.5% of liquidity pool = 5 BTC.

The excess profit in this case is 5 BTC (510 – 500 – 5). SPA re-adjusts winning trader profits to offset the excess 5 BTC.

If SPA occurs, and you have a positive P/L for the day (you're a winning trader), your personal profit adjustment is equal to

–Excess Profit * (Your Day's P/L / Total Profit Across All Winning Traders)

For example, if you made a 0.5 BTC profit that day, your profit adjustment would be equal to -0.0049 BTC (meaning your day's profit is reduced by 0.0049 BTC) resulting in a net day's profit of 0.4951 BTC.

- 5 * (0.5 / 510) = -0.0049

0.5 - 0.0049 = 0.4951

No profit adjustment occurs to traders who end the day's session with a negative P/L.