What Is the Bybit Insurance Fund?

As one of the world’s fastest growing cryptocurrency derivatives exchanges, Bybit prides itself on providing a fair, transparent and efficient trading environment. We also offer leveraged trading, allowing traders to open substantially larger positions than their actual initial investment. This makes trading on Bybit an attractive proposition, whereby any loss is limited to the initial margin while the upside is not capped.

Leveraged trading on Bybit means that traders can apply up to 100x leverage to their trades when opening a position. However, a highly leveraged position may be liquidated and closed at a worse than bankruptcy price in a volatile market. How can we manage and absorb the excess loss, so traders already dealing with loss are not on the hook for more than their initial margin, and profiting traders are not made to cover the difference?

That’s where the Bybit insurance fund comes in.

Bybit’s insurance fund is, quite simply, a reserve pool that the system can dip into in order to protect traders from negative equity and being held accountable for excessive loss. Assuming that a trader’s position has been liquidated; if the close price is better than the bankruptcy price, the trader’s remaining margin will be added to the insurance fund. However, if the close price is worse than the bankruptcy price, the loss of the position will have exceeded the trader’s initial margin, whereupon the deficit will be covered by the insurance fund.

How does the Bybit insurance fund work?