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.”