The Insurance Fund represents the total amount of Liquidation Fees maintained by Crypto.com. It is designed to cover losses from 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, winning trades can withdraw realized profits
after the next session settlement.
The Socialized Loss Mechanism will be triggered when excessive amount of losses
incurred from liquidation cannot be covered by the Insurance Fund. When the Insurance Fund is depleted, any uncovered loss will be socialized among the winning traders at the end of the trading session (that is, the Session End Time).
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.
Example
Let’s assume the insurance fund is down 10,000 USD
Traders with positive profits will share the loss on a pro-rata basis (numbers below are rounded to 2 decimal places for illustration 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 F | 30,000 | 17.54% | 1,754.39 | 28,245.61 |
Trader G | 15,000 | 8.77% | 877.19 | 14,122.81 |
Trader E | 1,000 | 0.58% | 58.48 | 941.52 |
Total | 171,000 | 100% | 10.000 | 161,000 |