Mastering Bybit UTA: How to Customize Your Collateralized Assets

The Bybit Unified Trading Account (UTA) is highly valued by traders and investors for its versatile customization and accessibility. It allows traders to combine trading and cross-collateral margin without switching between accounts. Most investors prefer UTA for its capital efficiency optimization. 

In this guide, we’ll explore the newly added feature of collateral assets customization and learn some tips and tricks to avoid common pitfalls when using this feature.

Key Takeaways:

• Bybit UTA obviates the switching of multiple accounts so investors can increase their capital efficiency.

• Since all assets are consolidated under one account, the unrealized profits or losses from different products can be used to offset one another.

• The Bybit UTA custom collateral assets function offers traders enhanced capital efficiency as they strategically manage their liquidation risks, based on the collateralization of their chosen assets.

What Is Bybit UTA?

The Bybit Unified Trading Account (UTA) offers traders access to multi currency trading functions, unlocking the powerful capability to combine and customize their assets and collateralized assets without switching between accounts. 

With the Bybit UTA, users can utilize Cross Margin and Portfolio Margin modes to trade other assets’ margin contracts, without selling their assets, by using support margin assets as collateral. At the same time, their unrealized profits can be used as a margin to open new positions. The margin under UTA is calculated based on the overall account margin level, rather than a position level. 

Understanding Collateral Assets

Traders utilizing Bybit UTA for Cross Margin and Portfolio Margin trading can greatly benefit, as they don’t need to sell off their assets to trade other margin contracts. This is where collateral assets come into the picture. To understand collateral assets, let’s take Margin Trading as an example. The concept of margin is closely related to leverage, which uses borrowed capital to magnify return on investment (ROI). With Margin Trading, funds are borrowed from a broker to boost the purchasing power and add leverage for larger capital. Thus, leverage is closely tied to margin, as it involves utilizing borrowed money to amplify your ROI. 

Assuming the market is against the trader, it may trigger a Margin Call, whereby traders need to deposit additional funds to meet the margin requirements. These margins are dubbed collateral, as they maintain the longevity of the position. If a trader fails to meet the margin, the resulting shortfall will lead to liquidation of the position in order to cover the outstanding debt.

When the Portfolio Margin mode is activated under Bybit UTA, the calculation for the margin requirements will change. Unlike traditional calculation, it considers the overall risk of a portfolio, rather than each position in isolation. By reviewing portfolio-level risk, Bybit can reduce a trader’s margin requirements, increasing their buying power and trading flexibility. In other words, traders can trade larger positions requiring less margin, while maintaining a balanced portfolio of hedged positions with increased leverage. 

Newly Added Feature: Custom Collateral Assets

With the customization of collateral assets, traders enjoy enhanced capital efficiency, even as they effectively manage their liquidation risks without risking the assets they wish to hold.

Benefits of Customizing Collateral Assets

With the continuous upgrade of Bybit UTA, the newly launched collateral assets customization function is the first in the industry to allow users to customize their collateralized assets, offering them a better-managed portfolio of hedged positions. 

Users who preserve their assets can choose not to use a specific asset as collateral. To do this, a user needs to set the desired currency as non-collateral, and the system will show that the asset isn’t eligible for collateralization. When a user sets a currency as non-collateral, the asset will be exempted from UTA liquidation. This also means that positions in Spot and Derivatives won’t affect one another. 

Custom Collateral Assets: Example

Trader A decides to exclude BTC under a Cross Margin or Portfolio Margin mode, so the uncollateralized assets in the UTA won’t be converted to USD. Thus, different collateral value ratios will only apply to different assets based on the chosen collateralized assets. The total margin balance in USD value of the UTA is calculated based on the following formula: 

Total Asset Value (in USD) = Sum (Asset 1 × Corresponding USD Index Price × Corresponding Collateral Value Ratio + Asset 2 × Corresponding USD Index Price × Corresponding Collateral Value Ratio + … + Asset N × Corresponding USD Index Price × Corresponding Collateral Value Ratio)

Notes: 

• The collateral value ratio only applies to assets with a positive balance. For assets with a negative balance, the collateral value ratio will default to 100%, irrespective of the specific asset. 

• Parameters may be modified based on market conditions. Bybit will notify users in advance. 

• The USD Index Price can be derived as follows:

USD Index Price = BTCUSDT Perpetual Index Price × USDT Conversion Rate

USDT Conversion Rate = BTCUSD Index Price / BTCUSDT Index Price

If there is no USDT Perpetual Index Price for a certain coin, the Last Traded Price from the Bybit Spot market will be referenced. For example, the USD index price for ETH will be calculated as ETHUSDT Index Price × USDT Conversion Rate. 

Note, however, the account’s Maintenance Margin (MM) rate will still trigger the liquidation. 

So whenever the MM rate reaches 100%, and Trader A still holds multiple positions, but one or some of the positions have losses may cause the account Maintenance Margin (MM) rate to hit 100%, thus, liquidation will be triggered. 

Ready to get started with Bybit UTA? 

Start upgrading your account by following these steps:

1. Visit Bybit Spot, Derivatives, or Options trading page or head to your Spot, Derivatives or USDC Derivatives Account under the Assets page

2. Click "Upgrade to Unified Trading Account"

3. Complete the Bybit UTA tutorial in a pop-up and pass all of the short quizzes to get started.

Note:

• Bew Bybit users from Sept. 1 onwards is registered by default as Bybit UTA user (no upgrade is needed)

• Only existing Bybit users who are not using Bybit UTA are encouraged to upgrade

Limitations of Customized Collateral Assets

Users can isolate the liquidation risk of some currencies while using a unified trading account. However, there are several limitations.

When an account is in liquidation, collateral assets customization cannot be adjusted. This is because Spot or Derivatives positions may have already generated an unrealized profit and loss. Depending on the MM rate, the liquidation process may have already been initiated. Thus, changing the collateral assets may affect liquidation risks. Traders should confirm their customized collateral assets before confirming their Spot or Derivatives market orders.

If the Initial Margin (IM) rate in a trader’s UTA reaches or exceeds 80%, the customization of collateralized assets won’t be adjusted. For example, if the IMR was 70% before, and while adjusting certain collateral the system tries to calculate that the IM may reach or exceed 80%, this adjustment won’t be successful. That said, if the traders’s wallet balance is below 0, the collateral assets can no longer be customized. 

As much as we would love to provide this function to all traders, it’s currently only available for traders in categories from VIP 0 to PRO. Bybit is working to upgrade this feature in the hopes of making it available to Institutional Loan users in the future. 

Common Mistakes to Avoid When Customizing Collateral Assets

Customizing your collateral assets for Derivatives or Spot Trading is important for risk management and enhanced capital efficiency. However, traders may under- or overestimate the power of doing so. 

Here are several common mistakes that traders and institutions should avoid when collateralizing assets. 

Lack of Diversification

Relying heavily on a single type of collateral asset can expose a trader or institution to significant risks. Diversification helps spread risk across different assets, reducing the impact of an asset's price or value swing in a volatile trading environment. 

For example, using a highly volatile asset as collateral may increase the risk of a margin call. If the value of a collateralized asset drops significantly, you might be required to post additional collateral to cover the margin call.

Neglecting ‘Haircuts’

Haircuts are the percentage reduction applied to collateral value to account for potential market fluctuations. Failing to apply appropriate haircuts can lead to underestimating the risk associated with collateral assets, potentially exposing a trader to greater loss.

Inadequate Monitoring

Collateral assets should be continuously monitored to ensure they meet the necessary requirements. Failing to keep track of the value and quality of your collateral can lead to “surprises” and potentially costly margin calls.

Poor Quality Collateral

Accepting low-quality or low-rated assets as collateral can lead to higher risk exposure. Proper due diligence should be performed to assess the quality and creditworthiness of collateral assets.

Failing to Rebalance Your Portfolio

Market conditions change over time, and the values of various assets can fluctuate. Failing to rebalance your collateral portfolio periodically can lead to an imbalance in your risk exposure.

In summary, customizing collateral assets for derivatives or spot trading requires careful consideration and risk management. Avoiding these common mistakes can help ensure a more secure and stable trading environment. 

The Bottom Line

The Bybit UTA custom collateral assets function allows traders to easily customize their collateralized assets for a better-managed portfolio of hedged positions. Users can also strategically utilize their gains and losses generated from different trading markets to offset each other, based on their desired trading strategies and the assets chosen. 

Although the feature is not yet available for Institutional Loan traders, Bybit is actively upgrading the platform with better features to fit the demands of all traders. All in all, trading with collateral assets involves higher risks. Please consult a financial advisor and do your due diligence before trading. 

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