Bitcoin Insurance Funds Take a Beating as Markets Rout

Amid global market mayhem, several major Bitcoin (BTC) and crypto insurance funds are showing signs of severe strain. 

As of March 13, Bitcoin derivatives exchange Deribit recorded a shocking slide in the balance of its Bitcoin insurance fund, down from 391 BTC to 183 BTC (-53%) within a span of three days.

Deribit Bitcoin insurance fund balance. Source: deribit.com

Binance’s insurance fund balance halves overnight

Earlier today, the Binance Insurance Fund issued an update on Twitter, revealing it had used over $6,000,000 in the past 24 hours to reduce auto-deleveraging (ADLs) on its platform.

“In the event that the insurance fund continues to deplete, we will inject new funds and continue protecting our users,” the exchange pledged.

Binance Insurance Fund Balance, in Tether (USDT). Source: @binance, March 13

Binance’s data reveals its insurance fund had more than halved overnight, dropping from 12,864 Tether (USDT) to 6,227 between March 12 and March 13.

Binance did not immediately respond to Cointelegraph’s request for comment.

Insurance funds across the industry

Between March 11 and 12, data from crypto derivatives trading platform BitMEX indicates that its daily insurance fund dipped only slightly — from 35,508 BTC to 33,881 BTC. 

As of press time, the fund’s balance is yet to be updated for March 13, preventing any conclusive assessment of the impact of the markets’ turmoil.

Data from crypto exchange OKex shows that 1,009.5 BTC was deposited into its BTC/USD Futures Insurance Fund, with 475.2 BTC thereafter withdrawn to cover a bankruptcy loss. 

Between Feb. 24 and March 9, no withdrawals from the fund had been made at all.

The balance for Huobi’s Bitcoin Insurance Fund, meanwhile, shows an increase between March 12 and 13, from 1,121 BTC to 1,327 BTC. 

The exchange, however, does not provide a breakdown of the data that would reveal the pattern of withdrawals and deposits within the same time period.

Reading the signs

As early as January, prominent Bitcoin advocate Andreas Antonopoulos had uncannily forecast the scenario of this week’s financial turmoil and its likely impact on the crypto markets.

“When people get scared, when there is a recession like that, they pull back their investments, and they’re going to pull back from crypto too,” he said at the time.

This week, several traditional markets suffered their worst blows since 1987, and Bitcoin followed by plummeting 60% to lows of around $3,600 on some exchanges.

Some, notably Edward Snowden, are mulling whether to buy the big dip. The whistleblower tweeted earlier today that:

“This is the first time in a while I've felt like buying Bitcoin. That drop was too much panic and too little reason.”

As of press time, Bitcoin is trading $5,611, down 7.3% on the day, according to Cointelegraph’s Bitcoin Price Index.