@dev0xx

here is a precise, technical explanation of yesterday's crash and why it is HEALTHY: think of futures/perps market as a basket of loans. leverage = borrowing money naturally, each loan has a probability of default, and the basket is priced based on both P(default), but also the correlation between defaults on each loan (likelyhood we get more defaults if a loan defaults) lenders have an incentive to underestimate the correlation between defaults. because it allows to price their basket higher and keep selling it. exchanges show collateral, reserves and can attract more traders. the problem is loans are much more correlated than their price shows. the timing of the cascade is random, and needs a trigger like trump tariffs on china. but what happens after that is coded: > price goes down > triggers first liquidation/loan defaults > price goes down > etc 1 default = 1 more default. defaults are correlated. so, although lots of ppl lost money, the whole system would have lost a lot MORE in another, worse scenario the other worse scenario is basically the 2008 crisis. the system was contaminated with overpriced mortgage loans b/c banks/insurances (often intentionally) underestimated correlation between defaults when a house went for sale after default, it affected prices of surrounding areas (more supply), which triggered more defaults etc all defaults lead to volatility, but volatility is not linear. a 50% market crash is much worse than 5 10% crashes. this non linearity explains why crypto is stronger than tradfi. in crypto, we get a chance to learn from these crashes often and improve the system for the better in tradfi, crashes happen less often, but when they do, they have a much much larger impact b/c they've infected the whole system

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