As a cryptocurrency derivatives exchange, Interdax does not trade against its customers and the losses caused as a result of a trader exceeding his margin requirements are handled by the insurance fund.
Depending on the final liquidation price and its relation to the bankruptcy price, the insurance fund will increase or decrease.
For example, if a trader’s position is taken over by the insurance fund and the liquidation price is at a better price than the bankruptcy price, the remaining margin is added to the insurance fund.
On the other hand, if a trader’s position is taken over by the insurance fund and the bankruptcy price is better the liquidation price then the contract loss is covered by the insurance fund.
The bankruptcy price is the price at which the trader’s entire initial margin is depleted while the liquidation price is based on the entry price, maintenance margin and leverage.
As you increase the leverage of a position and reduce the maintenance margin, the liquidation price is brought closer to your entry price. However, as you decrease the leverage of a position and increase the maintenance margin, the liquidation price is pushed further away from your entry price.
Suppose a trader went long at $9,400 with a liquidation price of $9,000 and a bankruptcy price of $8,990. If the mark price hits $9,000, the position will be liquidated.
If the position is liquidated at any price above $8,990, the remaining margin in BTC is added to the insurance fund. However, if the position is liquidated at $8,990 or at a lower price, the contract loss is covered by the insurance fund.