Popular cryptocurrency derivatives trading platform BitMEX has clarified the role of its Insurance Fund in a lengthy blog post meant to defend it from criticism being received after the crypto market crash.

The blog post was published to address questions related to the derivatives exchange’s Insurance Fund, which was criticized for not being used to help during a crypto market crash earlier this month that saw the price of BTC drop from $7,100 to a $4,000 low between March 12 and 13.

The price crash, according to data from Datamish, led to over $1.6 billion worth of cryptocurrency in liquidations. Meanwhile BitMEX’s insurance fund grew to 34,670 BTC ($224 million). In the post, the exchange clarified the Insurance Fund acts as a “last line of defense” during highly volatile periods to prevent Auto Deleveraging (ADL), which is the “automatic deleveraging of the positions of profitable traders (ranked by profit and leverage in that contract) against liquidated positions to prevent bankruptcy.”

The Fund, per the exchange, assures its users that while there is limited downside for losing traders – who end up being liquidated – there is no limit to the upside and profitable traders are likely to receive their gains. BitMEX clarified the Fund’s purpose, pointing out:

t does not cover BitMEX running costs or contribute to BitMEX profits. It does not demand payments from traders with negative account balances. And it is not used to influence markets, intentionally or otherwise.

During the crash earlier this month, BitMEX adds, “ADL was completely prevented.” Per the derivatives trading platform it’s important for the Insurance Fund to be “large enough to absorb intraday shocks.”

The blog post further claimed that “no other fund in the crypto ecosystem has the size to survive such an event,” noting that on other platforms it could lead to “massive loss-recovery events.”

In response, users on social media claimed that while they do understand the fund “can’t protect against an event like this,” the worst-case scenario almost occurring and it barely being used raise questions regarding “it’s overall efficacy.”

Featured image via Pixabay.com.