Mark Price vs Index Price: Why Scam Wicks Don't Liquidate You
Mark Price is the estimated fair value of a perpetual contract used to calculate liquidations. Learn how it protects you from flash crashes on CLOB exchanges.
Mark Price
Mark Price is the estimated fair value of a perpetual futures contract, calculated by the exchange to determine your unrealized profit/loss and to trigger Liquidations. It is specifically designed to smooth out extreme, short-term volatility.
If you are trading on a perp DEX like Hyperliquid or a CEX like Binance, understanding the difference between Mark Price, Index Price, and Last Price will save your portfolio.
The Three Prices of Perps
When you look at a trading terminal, you are actually dealing with three different numbers:
- Last Price: The exact price at which the very last trade was executed on that specific exchange’s Order Book.
- Index Price: The average spot price of the asset across multiple major spot exchanges (e.g., an aggregate of Binance, Coinbase, and Kraken spot markets).
- Mark Price: A smoothed calculation that stays very close to the Index Price, factoring in the current Funding Rate.
Why Mark Price Exists (The “Scam Wick” Protection)
Imagine you are long $BTC at $65,000 on a perp DEX with low liquidity. Suddenly, a whale decides to market-sell a massive $50 Million position. Because of Price Impact, this massive sell eats through the entire order book and drops the Last Price to $55,000 for a fraction of a second.
If the exchange used the Last Price to calculate liquidations, every single trader who was long $BTC on that exchange would be instantly liquidated, even though the actual spot price of Bitcoin on Coinbase never dropped below $64,900.
Because exchanges use the Mark Price (which is anchored to the external Index Price), the whale’s massive dump on the local order book does not trigger your liquidation. The Last Price will show a massive red “scam wick” down to $55,000, but your position remains perfectly safe because the Mark Price barely moved.
Related Terms
- Liquidation Penalty — What happens when the Mark Price finally crosses your threshold.
- Cross vs Isolated Margin — How to manage the margin that protects your liquidation price.
- How Funding Rate Arbitrage Works — Strategies that exploit the gap between Mark Price and Index Price.