Introduction

This article explains the purpose of the Insurance Fund on Coinlocally Futures and how it protects traders during extreme market conditions.

What the Insurance Fund does

The Insurance Fund covers losses when a liquidated position closes at a price worse than its Bankruptcy Price.

How it works

During liquidation:

• If the final execution price is better than the Bankruptcy Price →

The remaining margin is added to the Insurance Fund.

• If the execution price is worse →

The Insurance Fund covers the loss gap.

Why it exists

• To prevent Auto-Deleveraging (ADL)
• To protect traders from unexpected losses
• To stabilize the Futures market during volatility

Additional notes

• If the Insurance Fund becomes insufficient, ADL may be triggered.
• The fund grows or shrinks depending on liquidation outcomes.
• It is designed to reduce systemic risk.

Common Issues

• Confusing Insurance Fund with user margin.
• Assuming the fund guarantees no ADL — it reduces the risk but does not eliminate it.
• Misunderstanding why liquidation sometimes affects the fund positively or negatively.

feeling lost?

If you want to understand how the Insurance Fund affected your liquidation, our support team can help clarify the details.

Updated on: 01/13/2026