The Crypto Rundown 293: Canary in the Coal Mine of Liquidations

Unknown Source October 21, 2025 44 min

artificial-intelligence investment startup google

64 Companies

60 Key Quotes

3 Topics

🎯 Summary

Podcast Summary: The Crypto Rundown 293: Canary in the Coal Mine of Liquidations

This episode of The Crypto Rundown focuses heavily on recent volatility in the Bitcoin market, the systemic risks associated with leveraged crypto derivatives (perpetuals), and the explosive growth of regulated Bitcoin options products, particularly the IBIT ETF options.

1. Focus Area

The primary focus is on Crypto Derivatives Markets, specifically analyzing recent large-scale liquidations, the structural differences between crypto and traditional finance (TradFi) clearing mechanisms, and the rapidly evolving landscape of Bitcoin and Ethereum options trading driven by new institutional products.

2. Key Technical Insights

Liquidation Mechanics in Crypto: The recent $19 billion liquidation event (triggered by geopolitical news) represented a smaller percentage of market cap (47 bps) than the COVID crash (51 bps) but occurred on a much smaller price move (12% vs. 24-35% previously). This highlights the extreme sensitivity of highly leveraged perpetual contracts.
Auto-Deleveraging (ADL) Risk: Unlike TradFi’s central clearinghouses, fragmented crypto exchanges utilize ADL, which can forcibly close out profitable, hedged positions (like basis trades) when counterparties fail, leaving market makers unexpectedly exposed to underlying spot risk.
Perp vs. Spot Dislocation: During the recent volatility, perpetual contract prices traded significantly below spot prices (e.g., perp low at $102 vs. spot low at $108), demonstrating severe market stress where funding rates offer no protection.

3. Market/Investment Angle

IBIT Options Dominance: Options trading volume and open interest for the IBIT ETF are now rivaling or exceeding established venues like Deribit, signaling a major influx of new, likely equity-oriented participants into crypto derivatives.
Volatility Uptick: Bitcoin’s 30-day realized volatility has increased significantly (from 36.3 to 44.25 since the last show), suggesting the market is pricing in greater uncertainty.
Digital Gold Thesis & Skew: The long-term 180-day risk reversal skew for Bitcoin is slightly negative. The guest suggests this presents a buying opportunity (selling puts/buying call spreads) for those who believe Bitcoin will transition fully into a “digital gold” hedge, eventually following gold’s trajectory.

4. Notable Companies/People

Greg Magadini (Amber Data): Guest expert providing data-driven analysis on market structure, liquidations, and options metrics.
MicroStrategy (MSTR): Mentioned as the benchmark for corporate treasury adoption, with concerns raised about the maturity schedule and cost basis ($74k average) of their leveraged Bitcoin holdings potentially triggering forced selling if prices drop significantly.
IBIT (iShares Bitcoin Trust): Highlighted as the primary driver of new options volume and participation in the BTC derivatives market.
Vol Shares: Mentioned for filing applications for highly leveraged (3x and 5x) ETFs on various crypto assets (BTC, ETH, SOL, XRP) and equities (COIN, MSTR), though liquidity concerns are noted.

5. Regulatory/Policy Discussion

The discussion touched upon the potential approval of the highly leveraged 3x and 5x ETFs. While these filings are not yet approved, the current regulatory environment is perceived as less likely to reject them outright, though the guest expressed strong skepticism regarding the liquidity and utility of 5x leveraged products for the average trader.

6. Future Implications

The conversation suggests a bifurcation in the market:

Short-Term Risk: High leverage among corporate treasuries and highly leveraged retail traders using perpetuals remains a significant risk for cascading liquidations, making the recent dip a potential “canary in the coal mine.”
Long-Term Maturation: The massive growth of regulated options products like IBIT options indicates that Bitcoin is increasingly being treated as a traditional risk asset by a new class of institutional and retail participants, potentially leading to a shift toward the “digital gold” narrative over time.

7. Target Audience

Crypto/DeFi Professionals, Quantitative Traders, Options Traders, and Institutional Investors interested in the mechanics of crypto derivatives, market structure risks, and the impact of regulated products on volatility and pricing.

🏢 Companies Mentioned

BMNR ✅ Exchange/Mining/Product

BITTO ✅ institution

BITX ✅ institution

Palantir ✅ Institution

Tron ✅ Layer 1

Then Greg ✅ unknown

B M N R ✅ unknown

If I ✅ unknown

Altcoin Universe ✅ unknown

But MSTR ✅ unknown

The ADV ✅ unknown

IBIT ETF ✅ unknown

Futures Rundown ✅ unknown

But I ✅ unknown

XRP ETFs ✅ unknown

💬 Key Insights

"But that being said, the Web3 play is more of a risk-on play, and there isn't quite the same catalyst for ETH as there is for gold or a third of as there is for Bitcoin from gold. So, if I think about ETH as the crypto tech play, then I think the catalyst is AI stocks and the NASDAQ. If I look at Bitcoin as the digital gold play, and I think gold is the comparative asset..."

Impact Score: 10

"ETH is more of a risk-on play. The digital asset treasuries that corporates are using to buy ETH, they've been purchased at a higher price level. Some of them might be underwater at these price levels."

Impact Score: 10

"Yeah, kind of like the combination of owning some IBIT or selling some IBIT puts and at the same time selling some longer-dated calls on MSTR. I like that because they kind of offset each other, but I'm really trying to capture that decay factor, that quote-unquote tracking error in MSTR."

Impact Score: 10

"We saw a negative spot-vol correlation in Bitcoin last week. I personally still think that's an opportunity long-term. We see 180-day risk reversal skew for 25 delta being negative by a couple points. I like that. I like selling the put, assuming assignment risk, and owning some upside call spreads..."

Impact Score: 10

"MSTR is one of my favorite: sell the calls and watch that thing decay over time just from the tracking error, the daily tracking error from rebalancing."

Impact Score: 10

"The issue with these products [5x ETFs], in my mind, besides sort of the decaying factor and all that stuff that you should be aware about if you're holding these long-term or greater than 24 hours, they're never that liquid, so it's almost impossible to trade them."

Impact Score: 10

📊 Topics

#artificialintelligence 32 #investment 2 #startup 1