Insurance fund (crypto derivatives exchanges)
An insurance fund is a pool held by a crypto derivatives exchange to absorb the losses of liquidated positions whose losses exceed their collateral, so that the profits of traders on the other side can be paid. It is funded mainly by liquidation fees and is not an insurance product for traders' own losses.
Senzoukria · Glossary · Updated September 2026
The problem it solves
In a leveraged market, every profit on one side is paid by a loss on the other. When a position is liquidated too late, for instance in a gap or a thin book, its losses can exceed the margin its owner posted. That position is called bankrupt: the collateral is gone but the loss is not fully covered, so the winning side would not be paid in full. The insurance fund steps in to cover that shortfall.
How Binance describes it
- Binance calls its futures insurance funds safety nets that limit the impact of liquidations and states that they are not insurance products and that Binance is not an insurer.
- The funds receive liquidation clearance fees charged on liquidated positions that remain solvent, and any profit made when they take over a bankrupt position.
- They take over bankrupt positions where possible and cover losses beyond collateral; they are not used to cover traders' own losses.
- They have limits. When the unrealized loss of bankrupt positions exceeds what the fund can absorb for a contract, the auto-deleveraging mechanism is engaged.
Why traders look at it
The size and trend of an exchange's insurance fund are sometimes read as a measure of how well the venue can absorb extreme moves without falling back on auto-deleveraging. A fund that shrinks sharply during a crash shows that liquidations happened beyond collateral. The figure does not measure an exchange's overall solvency or the safety of deposits, which are separate questions.
In Senzoukria
The desktop does not display insurance fund data. Its crypto sources are public trades and order books of Binance Spot, Binance USD-M perpetuals and Bybit linear perpetuals, read for analysis only, and no crypto account or position is connected.
Related
In the same section
- Intercommodity spread
- Initiative activity
- Intrabar ambiguity
- Initial margin
- Intrabar delta
- Initial balance
- Intrinsic value
- Index price
Sources
- Binance: Introduction to Futures Insurance Funds (2026-09-25)
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Frequently asked questions
- Does the insurance fund protect my account if I lose money?
- No. It covers the shortfall of bankrupt positions so that traders on the other side can be paid. Your own losses, including a liquidation of your position, are not refunded by it.
- What happens if the insurance fund runs out?
- For the affected contract, the exchange uses auto-deleveraging: profitable positions on the opposite side are reduced or closed at the bankruptcy price of the liquidated position, ranked by profit and leverage.