How to Recover a Negative Balance on Binance Futures: Why You Don't Have to Pay It Back
4 min read · · Korean original
Contents 4
When you get liquidated while trading Binance futures, your balance can sometimes go negative. This happens when the price moves too sharply during liquidation or the position is so large that the system can't close it smoothly. To give you the conclusion first: you don't need to pay back a negative balance.
Why You Don't Have to Repay a Negative Balance
Binance pays it back for you.
Curious about the details? Then you first need to understand how liquidation works. As I explained in my post explaining liquidation on Binance futures, liquidation occurs when the sum of your initial margin and your profit and loss falls below the maintenance margin. In other words, liquidation takes place when the exchange decides it can no longer keep your position open.
So liquidation is a process that exists to protect your margin balance from going negative. That means if your balance does go negative, it isn't your fault. It's a failure on the exchange's side.
Why would the exchange take on this risk? If you've ever been liquidated, you'll know that liquidation kicks in slightly before the liquidation price is reached. This is because a liquidation fee is charged, and Binance uses it to fund its insurance fund.
In the end, the exchange charges users an insurance clearance fee (0.5%~4%) to protect them. Put another way, the exchange bears almost no risk, while the users who get liquidated are the ones paying the liquidation fee on top of their losses.
What Is the Binance Futures Insurance Fund?
Most crypto futures exchanges, Binance included, run an insurance fund. Below is Binance's insurance fund balance. Part of the fees users pay when they get liquidated is collected into this insurance fund. So far, it has reached USD 360 million. That's more than KRW 360 billion.
By using a futures exchange, you are basically "enrolled" (?) in this insurance fund (more precisely, it's closer to paying a premium the moment you get liquidated). In everyday life, when you have insurance and you get hurt or something goes wrong, you receive a payout, right? In the same way, an exchange's insurance fund is money the exchange sets aside for situations that call for compensation or relief, such as a negative balance.
This is how a negative balance gets restored automatically through the exchange's insurance fund. If it still hasn't been restored after some time, you can apply to have the negative balance cleared.
How to Manually Apply for Negative Balance Recovery
You can apply for negative balance recovery through the customer support center. However, you must meet the following conditions to apply for negative balance clearing.
- Multi-Assets Mode is turned off
- There are no open positions in any of your futures accounts
- The negative balance is less than 5,000 USDT
If you meet all of these conditions, you can apply for negative balance clearing as follows.
- First, click the customer support icon. Then switch the language to English.
- Type futures in the chat window as shown, and click order history.
- Next, type negative balance.
- When the window below appears, click Apply and your application is complete.
Wrapping Up
That covers why you don't have to pay back a negative balance on the Binance exchange, along with how to manually apply to have that balance cleared. If you found this helpful, please tap the heart below.
On top of that, I'm leaving a link that gives you a lifetime 20% discount on spot trading fees and a 10% discount on futures trading fees on Binance. Sign up through the link below to get these fee benefits.
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