BitMEX: Insurance Fund Coped With Its Task During Bitcoin Crash on March 13
Cryptocurrency exchange BitMEX on Monday provided “answers to a series of questions” about the role and functioning of its insurance fund during the bitcoin market crash on March 12-13. After these events, the size of the fund remained almost unchanged, while rival Deribit more than halved..
Changes to the balance of the BitMEX insurance fund
BitMEX declares that the fund has coped with its main task, namely, it allowed to prevent automatic deleveraging on successful traders’ positions and to avoid negative balance on liquidated positions..
Market movements on March 12-13 were colossal. A large volume of liquidations occurred, due to which the liquidation engine received a large long position that required closing in the XBTUSD market.
The trading engine placed this position on the market at prices that gradually became more aggressive (low). At this time, the liquidation engine suffered serious losses, which were reflected in a decrease in the insurance fund. The largest decline occurred on March 13 and amounted to 2,606 XBT. At this time, the largest unrealized loss on liquidated but still requiring closing positions was 5,652 XBT.
Thus, if the liquidation engine algorithm decided to close the active position at the label price, provided there was sufficient liquidity (which was not available at the time), the largest decline would be 8,482 XBT. The liquidation engine gradually closed this position above the average open price, resulting in an increase in the insurance fund by 4,457 XBT. At its peak, the balance reached 37,836 XBT and then declined 2,606 XBT due to realized losses on subsequently closed positions on the same day….
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