Insurance Fund

Hotcoin is a peer-to-peer cryptocurrency derivatives trading platform, hence we’re not involving in any trading activities . To protect the interests of users and the platform while avoiding Futures losses for either party, and for a purpose of improving user experience, Hotcoin uses the Insurance Fund to decrease the possibility of Auto-Deleveraging ( As well as Deleveraging by the Counterparty) : In the event of Liquidation, if the liquidated order is closed at a price worse than bankrupt price, Hotcoin will use the balance of the Insurance Fund to cover the gap. If the Insurance Fund is insufficient, Auto-Deleveraging will be triggered.

Insurance Fund Machanism

During liquidation, the balance of the Insurance Fund will increase/decrease depends on the price difference between the final Liquidation Price and the Bankruptcy Price of that liquidated position.

· When liquidations can be executed in the market at a price better than the Bankruptcy Price, the remaining margin will be added to the Insurance Fund.

· Vice versa, when the Liquidation Price is worse than the Bankruptcy Price, the contract loss will be covered by the Insurance Fund.

· Insurance accounts for each Futures are separated from each other, Hotcoin has deposited a certain amount of insurance fund for the insurance account.

For example:

A trader has a long position on BTC/USDT with the liquidation price at 48000USDT and Bankruptcy price at 47950USDT. Once Mark Price hits 48000USDT, this position will be liquidated.

If this position can be liquidated at any price higher than 47950USDT, for example, 47980USDT, the remaining margin in BTC will be contributed to the Insurance Fund.

Reciprocally, if the final execution price is lower than 47950USDT USD, for example, 47930USDT, the Insurance Fund will be used to cover the contract loss.