BitMEX Provides Clarity On The Insurance Fund After Traders liquidated Last Week

As the cryptocurrency market faced one of its worst days on Mar. 12 dubbed “Black Thursday” following Bitcoin‘s crash to $3,600 USD, BitMEX was put in the spotlight following a crash on its system. In a blogpost published on the website, the largest BTC Futures exchange explained what transpired on Mar. 12 and Mar. 13, to give traders a much needed clarity.

One of the key points that traders were curious about, is BitMEX’s insurance fund, which grew in value as the rest of the market collapsed.

BitMEX opens up on its BTC insurance fund

The statement starts by explaining the liquidation and bankruptcy levels and what processes take place during liquidation. The most important part of the blog is the explanation on what its insurance fund did once the world of crypto came crashing down.

At the time, the exchange was called out for “shutting down the exchange” for about an hour – BitMEX said it suffered double DDoS attacks – forcing out a number of traders in the process when the exchange came back online. Questions fielded in from most of the traders who wondered why the insurance was never activated during the crash.

The exchange wrote that the insurance fund is strictly levered to preventing auto deleveraging (ADL), which is explained as:

“ADL means the automatic deleveraging of the positions of profitable traders (ranked by profit and leverage in that contract) against liquidated positions to prevent bankruptcy.”

The post further states that the insurance fund is not be used to cover BitMEX running costs or contribute to BitMEX profits, and ‘it is not used to influence markets, intentionally or otherwise.”

Community rejects BitMEX explanation

While the explanation given by the exchange soothed a few hearts, a number of traders were left unconvinced. During the whole crash, the insurance fund hit an all-time high as other exchanges faces depletion on their funds. This prompted a number of questions from the community. One trader on Twitter wrote,

“Given that order book was well below mark price, liquidated long positions were well in the red, so it is strange that the insurance fund didn't lose more.”

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Lujan Odera
Lujan Odera
Lujan is a blockchain technology and cryptocurrency author and editor. He has worked in the field of cryptocurrencies and blockchain technology since 2015 helping him gain enough experience to be the writer he is today. He is known for his simple writing style that allows novices to understand the field in the simplest way.

[Alert] Use the author's self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

[Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses. Editorial Policy \\ Investment Disclaimer

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