Bybit, the world’s second-largest cryptocurrency exchange by trading volume, has announced upgrades to its insurance fund mechanism for perpetual contracts, taking a step forward in improving trader protection and minimizing Auto-Deleveraging (ADL) triggers during periods of high market volatility.
The significant upgrade introduces two specialized Insurance Fund Pools that replace the previous system of standalone funds for individual contracts. This new structure stands to increase the average loss-absorption capacity per contract by over 200%, significantly lowering the risk of unwanted ADL triggers that can disrupt trading strategies in extreme market conditions.
New Listing Insurance Fund Pool: Dedicated to newly-listed USDT Perpetual Contracts during their first 30 days of trading, featuring a minimum pool size of $8 million to provide enhanced protection during the typically volatile post-listing period.
Portfolio Insurance Fund Pool: Grouping up to 9 contracts with correlated volatility or shared liquidity sources, while dynamically adjusting pair composition and pool size. This enables more efficient risk management across related trading pairs with initial pool sizes ranging from $2 million to $4 million.
Both pools operate with a 30% drawdown threshold measured over 8-hour periods. When a pool's balance drops significantly and any single trading pair's drawdown exceeds this threshold, the system automatically triggers ADL protection mechanisms to maintain market stability.
Starting December 19, 2025, the rollout features gradual implementation across eligible trading pairs over approximately two months. Traders can monitor next-day (T+1) insurance fund balances and real-time drawdown ratios through Bybit's API interface and dedicated monitoring page.
All contracts undergo continuous monitoring based on metrics including open interest, risk exposure, liquidity depth, volatility patterns, trading volume, and underlying project fundamentals. Contracts from the New Listing Insurance Fund Pool may migrate to the Main Insurance Fund Pool or an appropriate Portfolio Insurance Fund Pool after their initial observation period, while Portfolio Insurance Fund Pool contracts may be reassigned to different portfolio groups as market conditions evolve.
During extreme market conditions such as sudden liquidity shocks, abnormal price dislocations, or widespread volatility, Bybit reserves the right to adjust ADL thresholds or manually add funds to Insurance Fund Pools to provide additional protection.
For detailed information about Bybit’s Insurance Fund Pool mechanism and ADL system, users may visit Bybit - Insurance Fund History.
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