Bybit Introduces Specialized Insurance Fund Pools to Curb Trading Risk
Bybit, the world’s second-largest cryptocurrency platform by trading volume, officially began rolling out a sophisticated new insurance fund mechanism on December 19, 2025. This upgraded system is specifically designed to enhance protection for USDT perpetual contracts and significantly reduce the frequency of auto-deleveraging events during periods of extreme market volatility. The initiative follows a year of rapid growth for the platform, which recently reached a milestone of 80 million global users. By shifting from a monolithic fund structure to a more granular, pool-based approach, Bybit aims to boost its average loss-absorption capacity per contract by over 200%. This proactive adjustment ensures that the platform remains a resilient liquidity hub, capable of handling the massive trading surges that characterized the fourth quarter of 2025.
The Strategic Rollout of New Listing and Portfolio Insurance Pools
The core of the new mechanism lies in the creation of two specialized categories: the New Listing Insurance Fund Pool and the Portfolio Insurance Fund Pool. The New Listing pool provides a dedicated capital buffer of at least $8 million for newly listed USDT perpetual contracts during their first 30 days, a period typically marked by high price discovery and volatility. Simultaneously, the Portfolio pool groups up to nine correlated contracts together, sharing a secondary reserve of $2 million to $4 million to manage shared liquidity risks. This structured approach allows Bybit to provide targeted protection tailored to the specific risk profiles of diverse assets, rather than relying on a single general fund. Traders can monitor these fund balances and drawdown ratios in real-time through an updated API interface, providing a new layer of transparency to the platform’s risk management operations.
Mitigating Auto-Deleveraging and Enhancing Market Stability
A primary objective of this insurance overhaul is to provide a stronger defense against Auto-Deleveraging (ADL), a process where profitable positions are closed to cover the losses of bankrupt accounts when insurance reserves are exhausted. By increasing the capital allocated to individual contract groups, Bybit significantly raises the threshold required to trigger ADL, thereby protecting successful traders from involuntary exits during flash crashes. The platform has also implemented an 8-hour drawdown threshold of 30%, which acts as an automated circuit breaker to preserve fund solvency. Furthermore, Bybit retains the authority to manually inject capital into these pools during “black swan” events, ensuring that the platform’s execution quality remains dependable even under duress. This evolution in insurance architecture marks a significant step in Bybit’s transition toward a more institutional-grade financial infrastructure.
