If you are wondering why your orders on OKX often get liquidated before your orders on Binance? Or why your orders on Binance make less money than your orders on OKX? Or why OKX has been slow to launch new contract trading pairs, is it because it doesn’t want to do it anymore? Then this long article will solve your confusion.
Revealed: OKX rarely lists new coin perpetual contract trading? On the contrary, Binance's new contract trading is booming? ——Is it a business decision? Compliance? No, it is actually a battle over the underlying algorithm
introduction
I wonder if you have found the same perpetual contract trading pair
Why can Binance's leverage be as high as 75x (of course, assuming you open it to 75x, the maximum you can open is 5000u), while OKX can only give 20x?
The prices of the same trading pair at the same time are different between the two exchanges? Are the funding rates also different?
Is it because you are so strong that the capital is targeting you? OKX is keeping an eye on your account and attacking your account; Binance is keeping an eye on your account and deducting your profits?
Don't be silly, kid. You're overthinking it... It's all because of the underlying algorithm.
1. What is perpetual contract trading?
We must first know the key factors that determine perpetual contract transactions:
1. Index price
2. Mark Price
3. Funding rate algorithm
The relationship between these three key elements can be summed up in one sentence:
Mark price + index price = the core algorithm mechanism that determines the "contract price" .
Funding rate algorithm = the mechanism that determines whether you should give money to others and how much money you should give .
As for the difference between Binance and OKX in their algorithms for these three elements, let me explain.
What?! You said you don't want to know the details? Just passing by to see the conclusion.
OK, then take a look at this simple comparison table
summary:
OKX's algorithm (mark price + buy 1 sell 1) determines that it has higher volatility than Binance's contract trading. The coarser granularity further exacerbates its volatility.
2. The Devil is in the Details
The following is a detailed explanation of the non-(hard) chat (core). If you feel bored, you can go directly to the next chapter:
Index Price
The index price refers to the weighted average price of spot circulation in the current market, which is usually taken from the spot prices of multiple mainstream exchanges and obtained after weighting.
In order to prevent a certain exchange from having a large price deviation due to technical or liquidity issues, the system will perform a "smoothing process":
Binance: ±2%
OKX: ±5%
Therefore, under extreme market conditions, OKX's index price fluctuations are greater than Binance , with a higher risk/return ratio and faster market response.
Mark Price
This is the most critical price in futures trading - it directly determines whether you will be liquidated .
The design concept of the mark price is: based on the spot index price, some reference factors of the contract price are added to form a more "reasonable" middle price, which is used to calculate profits and losses and margin calls.
The formula is:
Mark Price = Index Price + Basis
The so-called "basis" is the price difference between spot and futures, which is smoothed using a moving average to prevent interference from "spike" market conditions.
In other words, the fluctuation of spot prices is the biggest culprit of your margin call, not something as mysterious as "the exchange secretly changes the price".
OKX vs Binance’s Mark Price Algorithm Differences
OKX’s algorithm:
Only take the "Buy 1" and "Sell 1" of the contract, which is the middle price of the market (Taker price).
Without looking at the order book depth, the volatility is greater (easy to get stuck), but the price is closer to the market .
This means that when there is a divergence between the futures and spot prices, the regression will be faster, but you will also be more likely to be liquidated or make huge profits.
Under OKX's solution, the Mark Price is closer to the spot price, and when there is a price difference between the futures and spot prices, it will return faster.
Binance’s algorithm:
More cautious. It calculates three prices :
Weighted price that is strongly correlated to the spot index and funding rate (taking into account order book depth)
OKX style buy 1/sell 1 middle price
Actual transaction price of the contract
Then take the middle value of the three as the mark price.
The volatility is smaller and the stability is stronger, but the return speed between futures and spot is slower.
Why can the spot and contract transaction prices be different?
This is the norm for contract trading. The algorithm does not force the two to converge .
Therefore, the platform introduced a mechanism to "compensate" for this price difference: Funding Rate .
Arbitrageurs level the price through “forward/reverse positions”, but this mechanism actually has a bug, which we will discuss below.
How is the Funding Rate settled?
The positive or negative value of the funding rate is just the result of market behavior . Its function is to slowly return the contract price to the spot price by transferring costs.
The positions you hold will be charged funding fees at a certain period. For example:
You use 100U to open a 10x long position (nominal position 1000U)
The current funding rate is 0.1%
You will pay this period: 1000 * 0.1% = 1U
Positive rate: Long position → pays for short position
Negative Fees: Short → Pay Long
OKX’s funding rate algorithm:
The formula is:
(Contract price - spot index price) / spot index price, then take the moving average
Then use Clamp to limit the upper and lower limits (±1.5%)
Moreover, the lending rate of OKX is set to 0. In other words, the market hardly considers the real cost of borrowing coins.
Binance’s funding rate algorithm:
In comparison, Binance is more complex. On the basis of OKX’s algorithm (limiting the upper and lower limits (±2%)), it also considers two key factors:
① Lending rate ≠ 0
Binance's default lending rate is 0.01% , so even if the futures and spot prices are the same, a minimum funding fee of 0.01% will still be incurred.
② Premium Index + Impact Price (Impact Bid/Ask)
This part is the highlight. Binance is not satisfied with the "surface price" of buy 1 sell 1, but refers to the depth of the entire order book. However, the name is changed to the concept of "impact buyer/seller bid".
for example:
“Shock the sell bid”: When someone places a market buy order for $1 million, where will the price go?
“Impact the buy-side bid”: Conversely, where will the price be pushed down when selling?
These in-depth considerations allow Binance's funding rate to better reflect real supply and demand, rather than just focusing on the surface price.
Precision design
OKX precision: 0.0001 → The minimum order size is larger → Plus OKX is buy 1/sell 1, fast jumping
Binance accuracy: 0.000001 → See the order depth and the price changes are more subtle
Combined with OKX's mechanism of only referring to buy 1 and sell 1, it leads to:
The volatility is fast, the margin call is fierce, and the pace is fast, which is suitable for short-term quick shooters;
Binance is as stable as an old hen, suitable for stable trading with large funds and large positions.
Here is an example of a real-life funding rate bug that is “useless”:
When the contract price < the spot price (negative funding rate), arbitrageurs should:
Short spot + long contract → increase contract price
But here comes the problem:
If the spot tokens are controlled by the market makers and cannot be loaned out , arbitrageurs will not be able to complete this set of operations.
Even if you are willing to borrow, the lending rate may be higher than the funding rate, and the arbitrage opportunity will be lost.
As a result, the contract price is lower than the spot price for a long time, and the funding rate is continuously settled, so "long positions get money for nothing" but the price does not come back.
This is also why "magic coins" such as Alpaca/TRB can have such a cool operation. Even though Binance has adjusted the funding rate frequency and funding rate many times, it still cannot "persuade" the restless hearts of the leeks.
Interesting exchanges’ “conscience behavior”:
It is said that some exchanges with "a little conscience" will "print" some coins themselves in order to stabilize the price, sell them in the spot market, and go long in contracts to perform hedging operations.
Why is it called conscience? Because it could have directly printed coins to dump the market for arbitrage , but it chose to flatten the market - in capitalism, this is already very Buddhist. However, after the bug was discovered, the community attacked it.
You are smart and should have realized several key facts by now:
Mark Price determines the profit and loss status of your account
The funding rate mechanism is the bridge between futures and spot prices.
The algorithm design of different exchanges affects the pace of liquidation, capital flow, and even trading strategies.
Sometimes, the contract price cannot return to normal, not because the arbitrageurs did not see the opportunity, but because they have no money, no coins, and cannot borrow money.
3. Above the algorithm, below human nature - different trading techniques and offensive means
Because of the difference in algorithms, two different "trading methods" and listing strategies are derived (the premise is to control the spot market)
Trading on OKX:
It is easier to create a pin-type explosion: Since the mark price algorithm of OKX only refers to Buy 1/Sell 1, and the price precision is coarser, a slightly larger Taker order can drive the price to jump violently, making it very convenient to create a "pin-type explosion".
Higher volatility and lower pump/dump costs: You can influence market trends with less capital and trigger the counterparty’s liquidation faster.
Suitable for controlling the market and entering and exiting quickly: more suitable for short-term wash-out and rapid callback after hitting the user's stop loss.
Arbitrage is more aggressive: Because prices return quickly, operations such as futures-spot arbitrage, forward and reverse hedging, etc. can be frequently constructed.
Trading on Binance:
It is more difficult to drive price fluctuations: Since the depth of the entire order book is referenced, more pending orders must be consumed to "insert pins", and the cost of trading is higher. At the same time, because of the characteristics of the thickness of the order book, we can peek at the existence of "bankers" through the depth of the order book .
Suitable for slow layout and stable position control: stable big dealers may prefer this kind of "hen market" - it will not easily explode, but can steadily push up/lower prices.
Arbitrage opportunities are more difficult to trigger: but once arbitrage opportunities appear, they are more persistent. For example, the funding rate event of short squeeze also caused Binance to frequently adjust the settlement frequency of funding rates.
If this is Honor of Kings :
OKX is more suitable for assassins like Han Xin , who play the game of liquidation and shock wash; high mobility + wild area penetration + extreme escape;
Suitable for "fast-handed swordsman" traders who like to frequently attack and fight volatility in market fluctuations
Binance is more suitable for Zhuge Liang , a strategist who is good at trend control, fund management, and institutional arbitrage; calm calculation, kite tactics, and passive triggering harvesting.
Binance's algorithm emphasizes the balance between order book depth, impact price, and funding cost, just like Zhuge Liang's use of wisdom and system to plan the game, using kite tactics (funding rate) to exhaust the opponent - stable control, overall situation first (this is why most of the funding rate attrition wars occur on Binance)
4. Does the algorithm affect the exchange’s decision to launch new coins on a sustainable basis?
The answer is yes, and the impact is huge, especially in the context of severe lack of overall market liquidity and the need to "pour" new coins as soon as they are launched. How exchanges manage price fluctuations and control the risk of liquidation has almost become the "lifeline" of whether or not perpetual contracts can be listed.
From the perspective of mechanism design, Binance is more suitable for perpetual contract trading of new coins. First, its relatively smooth price mechanism constructs the mark price by combining the spot index, order book depth and transaction price to take the median value. This makes it relatively difficult for new coins to experience drastic "explosive pull-up and crash" market conditions in the early stage of listing, even if liquidity fluctuates violently, thus avoiding the risk of being liquidated, which in turn causes the exchange to bear losses.
Second, its depth-driven funding rate algorithm no longer relies solely on the bid-ask price of the market, but instead simulates large-amount Taker orders to calculate the "impact buyer/seller bid" and build a more realistic basis. This mechanism can effectively reduce the extreme profits/losses caused by liquidation, allowing market makers and project parties to dare to enter the market to stabilize prices.
In contrast, the risk of OKX launching perpetual contracts for new coins is significantly higher. Its algorithm results in coarser price granularity and more drastic fluctuations. In addition, the funding rate only looks at the market price and there is no constraint on the lending rate. It is like throwing the new coins directly into a sensitive, high-pressure liquidation trigger.
Under the premise of insufficient liquidity, any violent buying and selling may cause price spikes, leading to large-scale liquidation; after the liquidation, if the slippage is large and the counterparty is insufficient, it is easy to get liquidated, which will eventually lead to losses for the exchange itself. The launch of $OM is a typical example - high volatility, spikes, liquidation, and ultimately the exchange "harms others and does not benefit itself".
Therefore, in terms of algorithmic philosophy, Binance's robust mechanism makes it more suitable for the "large market value trend + institutional arbitrage" route, and it is also easier to conduct commercial docking with project parties/market makers; and although OKX's high volatility mechanism is more attractive to aggressive traders, if liquidity preparations are not made when the new currency is launched, it may backfire.
This is not a simple difference in business strategy, but an inevitable result determined by the underlying design philosophy.
5. Different underlying algorithms reflect different financial philosophies
You can think of this algorithmic game as a competition between two worldviews: one world advocates systematization, smoothness and stability - that is Binance; the other world believes in invisible hands, volatility and the extreme game of human nature - that is OKX. Which platform you choose not only determines your trading strategy, but also implies your belief in this financial world.
OKX: Behavioral Finance + Market Structuralism
OKX embodies a trading concept that is more "volatility-philosophical". Its core logic is: the market is not rational, it is a stage driven by human nature and a game of manipulation.
From an algorithmic point of view, OKX uses buy one sell one as the core calculation source of the mark price, and the price precision is coarser and the response to the market is more direct, which makes the price easier to "jump" and quickly trigger liquidation or profit explosion. This mechanism is almost a laboratory model of the behavioral finance school: prices are driven by emotions, and irrational decisions and herd behavior lead to market overreaction.
On OKX, strategies are not formulated based on the assumption of long-term equilibrium, but on "temporary imbalances in market structure." It encourages and even condones traders to exploit market microstructures (such as slippage, low liquidity, and pending orders) to reap profits. This is the core of the "structuralist trading philosophy," which is to create volatility by designing structural instability, thereby gaining excess returns.
It attracts traders who are good at rhythm fighting and dare to gamble - they don't need market stability, they need "violent volatility".
Binance: Efficient Market Hypothesis + Quantitative Finance School
In sharp contrast to this is another financial philosophy represented by Binance: although the market may be irrational in the short term, it will eventually return to equilibrium in the long run; the mission of mechanism design is to push the market towards stability and rationality.
In Binance's system, the mark price is the median of the spot index, the market price and the transaction price, and the funding rate also takes into account the borrowing cost and the impact price. This design is essentially to build a systematic arbitrage equilibrium mechanism, so that every deviation of the price can be gradually pulled back through a rational arbitrage path - this is completely in line with the belief of the "Efficient Market Hypothesis (EMH)": the price has reflected all information, and excess returns can only come from taking greater risks or systematic arbitrage.
Binance's logic is "market control". They rely on a low-volatility, high-trust, and cost-transparent trading environment. This concept extends to the quantitative finance school and system trading theory: using mathematical models to control the market, using combination strategies to hedge risks, and finding probabilistic advantages in certainty.
It does not let you fight with each other in the fluctuations, but allows you to use arbitrage formulas to incorporate the market into your logic step by step.
OKX is humanity-oriented, believing that the market is irrational, and that "emotions, volatility, and trading" are the eternal protagonists; Binance is structure-oriented, believing that the market can be modeled, anticipated, and managed, and volatility is just a deviation rather than a fate. This is not only a confrontation between the logic of the two products, but also an eternal debate between behavioral finance and quantitative finance, and between chaotic markets and rational markets.
Last words
Behind this seemingly cold battle of algorithms, it actually reflects two fundamental human understandings of the fictional "market": to view it as a battlefield full of humanity, where emotions, desires and games run wild; or to view it as an ordered entity that can be tamed by rationality, models and institutions?
OKX and Binance are like two philosophers, interpreting Heraclitus's "everything changes" and Plato's "rational order" respectively; one fights in chaos, and the other operates in a framework. Traders are not only betting on prices, but also choosing systems. Perhaps, real trading is not only about understanding algorithms, but also about insight into and control of the tension between human nature and order.
The market never sleeps, and the philosophy of the market never stops.
May you and I always maintain a sense of awe for the market.
References and inspirations @ownejin12
https://medium.com/@owenjin0112/%E4%BB%A5-rare%E4%B8%BA%E4%BE%8B%E6%8B%86%E8%A7%A3%E4%B8%BB%E6%B5%81%E4%BA%A4%E6%98%93%E6%89%80%E5%90%88 %E7%BA%A6%E8%AE%A1%E7%AE%97%E6%96%B9%E6%A1%88-%E8%B5%84%E9%87%91%E8% B4%B9%E7%8E%87-%E5%80%9F%E8%B4%B7%E5%88%A9%E7%8E%87-%E7%8E%B0%E8%B4% A7%E6%88%90%E4%BA%A4%E4%BB%B7-%E6%8C%87%E6%95%B0%E4%BB%B7%E6%A0%BC-% E6%A0%87%E8%AE%B0%E4%BB%B7%E6%A0%BC%E5%8F%88%E6%98%AF%E4%BB%80%E4%B9 %88%E5%85%B3%E7%B3%BB-%E5%A6%82%E4%BD%95%E8%AF%86%E5%88%AB%E8%BD%A7% E7%A9%BAshort-squeeze%E5%92%8C%E5%B9%8C%E9%AA%97spoofing-3f4ddc4d6bdf
