Does a Fully Collateralized Futures Market Eliminate the Risk of Socialized Loss?

Yes, in a perfectly and fully collateralized futures market, the risk of socialized loss is theoretically eliminated. Full collateralization means every contract is backed by 100% of its notional value, ensuring no counterparty risk or liquidation deficit can occur.

However, most crypto futures markets are leveraged, meaning they are not fully collateralized. Even with leverage, robust insurance funds and ADL aim to achieve a similar safety net.