Nukenomics 101:
1. Why do crypto markets tend to nuke
2. Signs that precede a nuke
3. Pre-nuke checklist
4. Aftermath of a nuke
1. Why do crypto markets tend to nuke
2. Signs that precede a nuke
3. Pre-nuke checklist
4. Aftermath of a nuke
1. Why do crypto markets tend to nuke
- Obvious answer: leverage. Leverage temporarily inflates the bid. More longs end up being opened than the market can afford. When they must close (quickly), there is often not enough real bid to absorb all those long positions
- Obvious answer: leverage. Leverage temporarily inflates the bid. More longs end up being opened than the market can afford. When they must close (quickly), there is often not enough real bid to absorb all those long positions
- Nukes often come at times where there aren't enough real buyers interested to buy at high prices anymore. The market therefore needs to come down a little for participants to be interested again
- A few years ago, nukes were mostly news driven. People traded mainly spot and a strong narrative was needed for people to capitulate their positions
- These days, we don't even need a narrative. Market got overheated, degens got nuked... is ample justification.
- These days, we don't even need a narrative. Market got overheated, degens got nuked... is ample justification.
2. Signs that precede a nuke
- High funding is the typical canary in the coal mine: signals overheating in derivatives market, which is likely to lead to forced closing of positions
- Aggressive moves on laggard coins
- General euphoria, 'we are all geniuses'...
- High funding is the typical canary in the coal mine: signals overheating in derivatives market, which is likely to lead to forced closing of positions
- Aggressive moves on laggard coins
- General euphoria, 'we are all geniuses'...
Good places to monitor funding are:
- Viewbase: viewbase.com
- Bybt: bybt.com
Also useful to follow @kingfisher_btc for regular updates mapping out liquidations levels.
- Viewbase: viewbase.com
- Bybt: bybt.com
Also useful to follow @kingfisher_btc for regular updates mapping out liquidations levels.
The days preceding a nuke can actually be very profitable. Coins will rip past all conservative targets, and max ape behavior will be max rewarded. Cautious ones will miss out bad.
3. Pre-nuke checklist
- Shorting not really recommended unless you get a comfy entry or late entry into momentum
- Closing leveraged long positions is usually best as even low entries can be challenged, i.e. risk of giving back uPnL at least
- Buying cheap puts to hedge spot
- Shorting not really recommended unless you get a comfy entry or late entry into momentum
- Closing leveraged long positions is usually best as even low entries can be challenged, i.e. risk of giving back uPnL at least
- Buying cheap puts to hedge spot
4. Aftermath of a nuke
- After a liquidation cascade, books are basically cleared and it takes time to rebuild open interest
- Apes will look to ape ASAP but are rarely rewarded by a V reversal. Instead it's way more common to chop until meaningful positions are rebuilt (24/48h)
- After a liquidation cascade, books are basically cleared and it takes time to rebuild open interest
- Apes will look to ape ASAP but are rarely rewarded by a V reversal. Instead it's way more common to chop until meaningful positions are rebuilt (24/48h)
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