Raising ETH margin in the worst 3% of 158 weekly returns
Should the exchange raise initial margin on leveraged ETH positions now, or keep current terms and rely on its liquidation engine to absorb a -8.90% hour?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 22 February 2021, ETH fell 26.6%, from 1933.54 to 1419.18, a 3.0 percentile return against 158 weeks of history, with a 49.73% range and 165.7% annualised realised volatility. The largest one-hour move was -8.90% on Tuesday at 08:00 UTC, and the worst day was -11.23%. ETH also lagged BTC by 5.22 percentage points, and perpetual funding stayed positive, averaging 0.0259% per eight hours. An illustrative exchange risk team sets margin for leveraged ETH clients in these terms.
Judgment
Raise initial margin for ETH, and set it from this week's tail moves rather than its average: the -8.90% hour and -11.23% day are the moves the liquidation engine must survive. Keep maintenance margin and liquidation triggers unchanged, and apply the new initial margin to new and increasing positions only, so that existing clients are not force-liquidated at the bottom of a 3.0 percentile week. Accept lower leveraged volume.
What would change it
If ETH's realised volatility and largest hourly moves stay near prior four-week levels for several weeks, the higher initial margin can be eased. If this week's liquidations filled close to trigger prices, the case for raising it weakens.
What sets this case apart
This is an exchange setting terms, not a trader sizing a position; the question is whether its own liquidation engine can survive a one-hour tail, not ETH's direction.