Does the Exchange Typically Hold the Insurance Fund in a Single Cryptocurrency?

No, an exchange typically holds the insurance fund in a mix of stablecoins (like USDT, USDC) and the underlying assets of the contracts it offers (like BTC, ETH). This diversification is a risk management strategy.

Holding stablecoins provides a stable base for covering deficits, while holding the contract's underlying asset is necessary to manage the collateral from liquidations of inverse futures contracts.