The spot account borrowing mode empowers traders to leverage their assets for enhanced trading flexibility. By transferring assets into a trading account, users can utilize them as collateral to borrow digital currencies and execute leveraged trades. This system aggregates all holdings—converted into USD value—to serve as margin for borrowing, order placement, and real-time risk assessment. Understanding the mechanics behind this functionality is essential for maximizing opportunities while managing exposure.
How Asset Values Are Calculated
In the borrowing mode, every asset in your account contributes to your overall trading capacity. Each coin or token is evaluated across several key metrics that determine its usability and impact on your risk profile.
Key Asset Metrics
- Currency Equity: The total equity of a specific cryptocurrency in your account, measured in USD. This reflects the full value of your holdings in that asset.
- Available Balance: The portion of a cryptocurrency that’s free to use for spot trading or options purchases. It excludes funds tied up in open orders.
- Frozen Amount: Assets currently locked due to active limit orders or pending strategies.
- Borrowed Amount: The quantity of a given cryptocurrency you’ve borrowed, including accrued interest.
At the account level, these values are consolidated into broader financial indicators:
- Account Equity: The net worth of your entire portfolio, calculated by summing each currency's equity multiplied by its current USD price.
- Adjusted Equity (Effective Equity): A risk-adjusted measure of usable collateral. It accounts for currency discount rates, potential losses from cross-asset trades, and estimated fees from open orders.
- Initial Margin Requirement (IMR): The total margin required to maintain all active borrowings, expressed in USD.
- Account Leverage: Derived by dividing total borrowed value by effective equity, this shows your overall leverage ratio.
- Maintenance Margin Ratio: A critical risk metric defined as effective equity divided by (maintenance margin + liquidation fee). Falling below 100% triggers protective actions.
👉 Discover how to optimize your margin efficiency with smart borrowing strategies.
Understanding Currency Discount Rates
Not all cryptocurrencies are treated equally when used as collateral. Due to varying levels of market liquidity and volatility, platforms apply discount rates when converting different coins into USD-equivalent margin value.
For example:
- BTC might have a 98% discount rate
- ETH could be at 95%
- Stablecoins like USDT typically enjoy a 100% rate
This means 1 BTC worth $60,000 contributes $58,800 toward your effective equity. These adjustments help balance systemic risk and ensure fair valuation across diverse assets.
Core Trading Rules in Borrowing Mode
Unified Collateral Framework
Multiple cryptocurrencies can be combined into a single USD-denominated margin pool. This allows traders to borrow and sell a coin even if they don’t hold it directly—provided their overall effective equity supports the position.
Auto-Borrow Order Validation
When placing an auto-borrow order, the system checks whether your effective equity covers the required initial margin. Consider this scenario:
| Currency | Equity | USD Value | Frozen | Discount Rate |
|---|---|---|---|---|
| BTC | 0.1 | $60,000 | 0 | 0.98 |
| ETH | 1 | $3,000 | 0 | 0.98 |
| USDT | 0 | $1 | 0 | 1.00 |
If you attempt to auto-borrow and sell 6,000 USDT at 60,000 BTC/USDT (2x leverage), the system calculates:
- Effective Equity = $8,700
- Required IMR = $3,000
Since equity exceeds requirements, the order is accepted. Upon execution, a 6,000 USDT liability is created.
However, if existing liabilities increase frozen amounts or reduce available margin, subsequent orders may fail—even with sufficient nominal holdings.
Manual Borrowing Conditions
Manual borrowing limits depend on:
- Available margin
- Sub-account borrowing caps
- Leverage tier brackets
- Lending pool availability
- Applied leverage multiplier
Notably, the calculation uses a conservative leverage assumption. For instance, when borrowing at 2x, the system evaluates based on 1x to prevent overextension.
👉 Learn how to calculate your maximum borrow limit under current market conditions.
Non-Auto Borrow Orders
For standard spot or options buy orders without auto-borrow:
- Effective equity must cover the trade’s margin requirement
- Available balance must meet the exact asset amount needed
Example: With 1 BTC and 10,000 ETH:
- You can only sell up to 1 BTC in a spot trade
- Only 1 BTC can be used to purchase options
Any modification to such an order converts it into an auto-borrow order, subject to adjusted validation rules.
Risk Management Protocols
Order Cancellation Policy
If your net equity falls below the sum of:
- Existing borrowings
- Potential liabilities from unexecuted auto-borrow orders
All pending auto-borrow orders will be canceled automatically. This safeguard helps stabilize your maintenance margin ratio by reducing exposure before critical thresholds are breached.
Position Reduction and Liquidation
When the maintenance margin ratio drops below 100%, the system initiates protective measures:
Warning Threshold
A notification is triggered when the ratio reaches 300% or lower, alerting you to potential liquidation risks.
Liquidation Process
- Repayment Priority: The system first uses available assets of the same type to repay debt.
Example: If you borrowed 1 BTC and hold 2 BTC, 1 BTC + interest will be deducted immediately. - Tiered Position Reduction: If repayment isn’t sufficient, the system reduces your borrowings step-by-step until the ratio exceeds 100%.
- Full Liquidation: If tiered reduction fails to restore safety margins, complete forced closure occurs.
Real-World Scenario
Suppose:
- Max allowable BTC borrowing = $1,000,000 equivalent
- You’ve borrowed $1,100,000 worth of BTC
- Maintenance margin ratio falls below 100%
The system reduces your liability back to $1,000,000—moving you down one borrowing tier—to restore compliance.
Frequently Asked Questions (FAQ)
Q: What happens if I don’t have enough of a specific coin to cover a sell order?
A: As long as your total effective equity supports the trade, you can still place an auto-borrow sell order. The system will automatically borrow the missing amount.
Q: Can I repay borrowed assets early?
A: Yes. Early repayment reduces interest costs and improves your margin health. Repayments can be made manually at any time.
Q: How often is interest charged on borrowed funds?
A: Interest is deducted hourly based on your outstanding balance and the prevailing rate for that currency.
Q: Why did my order get canceled unexpectedly?
A: Orders may be canceled if your account equity drops below required thresholds due to market movements or other active positions affecting margin usage.
Q: Are stablecoins treated differently in margin calculations?
A: Yes. Stablecoins like USDT usually have a 100% discount rate due to low volatility, making them more efficient as collateral.
Q: Does changing an order convert it into an auto-borrow trade?
A: Yes. Any modification to a non-auto-borrow order triggers revalidation under auto-borrow rules and classifies it as such.
👉 Explore advanced risk management tools to stay ahead of liquidation events.
Final Thoughts
The spot account borrowing mode offers powerful tools for experienced traders seeking greater flexibility and leverage. By combining multi-currency collateral support, dynamic discounting, and robust risk controls—including automatic order cancellation and tiered liquidation—the system ensures responsible trading within defined limits.
Understanding how effective equity, discount rates, and maintenance margins interact is crucial for avoiding forced exits and optimizing capital efficiency. Always monitor your leverage and margin levels closely, especially during volatile markets.
This article is for informational purposes only and does not constitute financial advice. Cryptocurrency trading involves significant risk, including the potential loss of principal. Leverage amplifies both gains and losses. OKX is not liable for any losses incurred. Please review applicable terms and regulations before trading.