The Insurance Fund represents the total amount of Liquidation Fees maintained by Crypto.com. It is designed to cover losses of traders where the Wallet Balance is less than 0 USD after all liquidations have occurred under Forced Liquidation.
In these cases, the Insurance Fund will be used to cover these losses. As long as the Insurance Fund is positive, withdrawal of realized profits can be withdrawn after the next session settlement; otherwise, if the Insurance Fund is depleted, any uncovered loss will be socialised among the winning traders at the end of the trading session (that is, the Session End Time). This will be done via the Socialised Loss Mechanism explained here.
Under the Socialised Loss Mechanism, all winners will share the loss on a pro-rata basis to the size of their profit during the trading session. 1% will be charged if the loss is less than 1% of the total of all realized gain of the winners. Any remaining amounts will contribute to the Insurance Fund.
Example A
Let’s assume the Insurance Fund is down 1,000 USD
The uncovered loss can be covered completely by the fixed percentage share of 1%, as seen in the Shared Loss (USD) column
The remaining 710 USD will contribute to the Insurance Fund and will not be returned to the traders
Trader | Trader’s Profit (USD) | Shared Loss (USD) |
Trader A | 50,000 | 500 |
Trader B | 45,000 | 450 |
Trader C | 30,000 | 300 |
Trader D | 30,000 | 300 |
Trader E | 15,000 | 150 |
Trader F | 1,000 | 10 |
Total | 171,000 | 1,710 |
Example B
Let’s assume the insurance fund is down 10,000 USD
The uncovered loss cannot be covered completely by the fixed percentage share of 1%; thus, traders with positive profits will share the loss on a pro-rata basis (numbers below are rounded to 2 decimal places for display purposes). The shared loss percentage is the percentage of a trader’s profit against the total profits of all traders.
Trader | Trader’s Profit (USD) | Shared Loss Percentage | Shared Loss (USD) | Trader’s Net Profit (USD) |
Trader A | 50,000 | 29.24% | 2,923.98 | 47,076.02 |
Trader B | 45,000 | 26.32% | 2,631.58 | 42,368.42 |
Trader C | 30,000 | 17.54% | 1,754.39 | 28,245.61 |
Trader D | 30,000 | 17.54% | 1,754.39 | 28,245.61 |
Trader E | 15,000 | 8.77% | 877.19 | 14,122.81 |
Trader F | 1,000 | 0.58% | 58.48 | 941.52 |
Total | 171,000 | 100% | 10,000 | 161,000 |