How Are Crypto Futures Insurance Funds Typically Replenished or Funded?

Insurance funds are primarily replenished through two main sources. The first is the residual margin from liquidations that are executed at a price better than the bankruptcy price.

The surplus margin, after covering all losses and fees, is added to the fund. The second source is a small portion of the liquidation fees charged to traders whose positions are closed by the liquidation engine.

Some exchanges may also allocate a portion of their general trading fees to the fund.