LIVE | Market Crash: What Happened and What’s Next

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going live. Boom. What's up, everyone? We're live. All right, we'll wait. We We'll uh we'll wait for some people to get in. Boom. >> What's up? What's up? Hello, everybody. All right, let's see. Doug, if you pull up the Empire Twitter, you will you should see >> Yeah. Let me uh >> Oh, there we go. >> This is out. on Empire Twitter. What's up? What's up, everybody?

>> Sorry. Let me just make sure this is uh >> Well, I need a haircut. >> Yeah, me too. >> Too busy. Too busy. >> Yeah. Here we go. Found it. >> Nice. What's up everyone? Waiting for some some more people to get in here.

We'll we'll start in like a minute or two. All right. >> This is I I I don't think I've ever tweeted something or where I see myself on the live stream. >> Yeah, it's terrible. It's terrible. Yeah, live streams are the worst. >> No, it's good. It's uh I can't can't edit anything out. That's makes it fun. >> Yeah, no pressure. No pressure. All right, let me drop this in the Empire Telegram channel and we'll kick this off.

[Music] Hold up everyone. Waiting like one more minute. We'll kick this off in just a sec. Shall we, Doug? >> Let's Let's do it. >> All right, let's do it. Sweet, everyone. All right. So, uh, I wanted to jump on with Doug because, uh, yeah, Friday was the biggest, um, liquidation in crypto history, and I think, uh, Doug probably had the best recap, um, of what happened, specifically focus on on the the ADL

system. But, uh, there's a there's a lot that happened here. I think, Doug, maybe the best place to start would be I want to cover everything like did Binance do something wrong? Like, should we have fixed price oracles? What are what is the ADL system? What happened with Athena? I I want to cover everything, but maybe I would just love to start with your best explanation of what happened. >> Everything. >> Yeah. Yeah. So, I don't know. I think people are still kind of piecing together what uh what happened. Like we're kind of in an interesting moment in the market now because you have uh right you have you have the traditional centralized exchanges, you have all of these perplexes out there. Um people are all kind of doing like new behavior especially like around uh farming and

and stuff farming the perexis. Uh so I think it's like kind of been somewhat of a new like market structure lately and maybe this is the first time it's like really been tested but uh you know obviously it started like Trump tweet it uh you know tweets all the time so is it like not necessarily it should have been as big a sell-off but but I think right like like in any case there there's a lot of liquidation in the system um particularly like maybe at the perked exit level um and I think there are a lot of I I think what was a big contrib contributor were people who were running delta neutral strategies and meaning like long in one place short in another place whether that's long on one coin short on another coin within the same exchange like hyperlquid or maybe long

at hyperlquid and you know short at lighter or aster another perex um right because there's kind of now this incentive there to like you farm points and you want positions at at multiple exchanges and and kind of collect collect the incentives and so I I think what happened is a lot of people thought they were delta neutral or thought they had less risk than they did, right? Like there's a lot of uh a lot of liquidity crises happen this way and people think their positions aren't as risky as they are. Uh and then turn turns out they are, right? And I think like you know the ADL stuff played a big part because when you think you're hedged and then one side of your hedge is no longer present, right? Like all of a sudden you

have you have a lot more a lot more risk. So, uh, it does seem to be that and probably some combination of I think there was a lot of turmoil at at Binance. Um, you saw a lot of spot coins there go to zero or essentially to zero. Um, which is crazy on the spot side. Uh, and I think there were a lot of liquidations of of pretty liquid alts. Um, and you know that kind of pushed this this kind of cascade process. But yeah, exact details are debatable for sure. So, what was the, you know, everyone always wants a clear headline, right? Like FTX, Luna, Celsius, like the smoking gun, right? Um, I saw a tweet about, you know, how there's, you know, $60 million of USD being sold on Binance

triggered the entire liquidation, which I I I think is incorrect, by the way, after looking into the timing of when that happened. But what is there is there a smoke? Is there like this is the reason for this massive liquidation in your mind? Is it like, you know, it was all an Oracle problem or it was all, you know, Trump's tweet triggered this or, you know, Hyperlid really screwed up or is is it a little more nuanced than that? >> I I mean, like with I I guess it's hard to know, but like I don't I don't see anything that's like clearly and like you said like the Athena DPEG uh some people are saying that I think like CL like posted where he's like okay like the timing just doesn't line up. Um I think it's like just right like there's a lot of leverage in the system like

this happens to crypto periodically. You get a lot of leverage buildup um and you get flushed. So so it almost feels like like May 2021 >> to me where it's like nothing like obvious happened besides just a lot of people have been levering up over the past few months. Um and you know you just you get flushed right like the first time you kind of test that. >> Yeah. Um yeah it's interesting. It it does feel kind of more like this like liquidation cascade, right? The last cycle I think everyone it was it's it's interesting. We've talked about this a lot on Empire. So like usual empire listeners will know this but you know last cycle was such a leveraged driven cycle but it was it was leverage not in um the traditional trading sense I feel

like in the or in today's trading uh like per sense it was leverage oftenimes given out by the centralized um lending desks right uh Genesis BlockFi uh Celsius um Nexo people like that and so but it was still a very lever driven cycle like I think at one point Genesis had like I'm going to totally botch this number but seven 60 billion dollars of loans outstanding or I maybe I'm off by an order of magnitude but a colossal amount of loans outstanding and uh this cycle everyone's like oh the the centralized lending has not come back there there's not leverage in the system like I think Galaxy had a report last month and everyone was pointing to it being like see there's no leverage like we still got a long way to go but people weren't looking at the other side of the

leverage which was you know we've had basically just this mania in pers like people I I wasn't at token but you know if you went to you know a lot of our team was there and everyone's like there's one topic burps and you've got hyperlquid and then obviously aster and lighter and all these things. So >> yeah, I think I think right like a lot of a lot of leverage has built up uh in perks and I think especially in in alts uh well I mean across everything like obviously BTC has like a ton of OI but like you have I think people got pretty comfortable going from say holding like Fcoin spot to like Fcoin 2X and that doesn't feel like that risky of a position. um like this 2x it's like or coins big uh big you know it's a big

token right like 2x shouldn't be super and and I think like a lot of people are kind of >> shocked thinking they weren't uh you know they weren't really at risk but like you know when these alts wick down you know more than 50% obviously like 2x is going to get liquidated um liquidated as well so I I feel like the alts are a big part of this um you know if if you look across like the markets um you know whether that's like lighter uh the LLP vault like a lot of like that took a lot of losses in in like kind of the longer tail of alts. Um the HLP, you know, made money on the other side, but that a lot of that was from like ADL and and just kind of turmoil there. A lot of the ADL was like in, you know, longer longer

kill alts. >> Wait, before getting into ADL, can we can you explain kind of like Okay, so you at the very top you said, you know, people were delta neutral, right? you're you're long on one thing, you're short on the other thing, and then uh you know, if what what what happens is like oh, one of one of those legs actually gets carried off, well, you're not so delta neutral. Um can you explain how it's supposed to work, right? Starting with like you've got you've got two legs of the trade maybe, then you've got like uh the maybe uh if the insurance funds start to step in, if we blow past the insurance funds, we get into the ADLs. Like explain the cas uh that cascade of how it's supposed to work.

>> Yeah. Yeah. Yeah. So I I guess uh you know whether it's delta neutral or not there's you know there's the same liquidation cascade but like uh maybe we could start with like the same like the the the whole idea like delta neutral um right and uh you know the point being I'm going to uh you know go long uh you know I'm going to go long BTC in you know this one venue and I'm going to short it in in this other venue and and like normally right like you would do that maybe to capture like a funding arbitrage right like funding's higher one place and lower somewhere else and you can kind collect uh this basis uh trade you know which which is what like Athena does right to a large extent right like this is a pretty big trade it can scale up a lot um you can also do

that right now because herbs are you know incentivizing you right like you get you know you get points which eventually translate into tokens and those are valuable and just for having OI even outside of that like that is a kind of a plus EV position um and I think especially they like are incentivizing OI or or positions in in longer tail assets. So, you know, the idea would be right, you pick one perfect, you go long there, you pick go short somewhere else, and like you do have to kind of manage your collateral back and forth, but like theoretically, if you keep that balanced, right, that's kind of like a risk-free, right? That that's theoretically, not practically, but like theoretically is risk- free because you're hedged um you're hedged out and kind of earning earning income.

Um, so that's like the whole idea like delta neutral and then like where liquidation like comes into and whether you're delta neutral or not is like if you're on an exchange um you know you have a certain amount of collateral at that exchange uh and you know whether that's Binance or or you know whether that's a centralized exchange or or perex right like they can only see the collateral you have there right like trady kind of solves this because they have like central clearing houses so you can one exchange >> and like you know they can kind of see your whole position your broker can see your old position. Um, but it's a little like crypto is always like, okay, every exchange is also its own clearing house.

So, >> right, Binance can't see your position on Hyperlquid. Hyperlid can't see your position on OKX. >> Exactly. Exactly. So, even though like you're hedge, right, and you shouldn't be that risky. Like, they don't need to. But, for they don't know that. They don't know that. >> They don't know that, right? They just see, okay, here's an account. He's levered up on, you know, whatever ETH or or Soul or, you know, whatever. this account's levered up and uh you know ETH is you know down whatever 20%. Um, right. There's only so much collateral in the system. There's so much margin. Um, at the end of the day, right, like the the exchanges whole goal is like we you you can have more losses than uh you have money to back it up, right? So, like you have to when when stuff goes down really fast, you you

either have to liquidate people quickly um or failing that sometimes stuff just gaps down. I think that was a big part there. You looked across every single alt and and things were down like 50% within within minutes and there's just not enough liquidity to liquidate. um liquidate everyone. So uh you know you go through this process where where normally in the happy path you liquidate exchange takes your position uh before you get underwater um and it tries to you know sell it off um into the open market and you know they'll do different things and they have different rules about how aggressive they are but but the idea >> so they take that position and that's that's the insurance fund.

>> Insurance fund is insurance fund is a little different. So the insurance fund is I'd say the next step on the waterfall. So, so normally normally the insurance fund shouldn't happen in that like the happy path, right? Like normally it should just be the market itself, right? Like you have >> Okay, so where we're at now is just the normal path of of >> normal this normal path. You're just a regular, right? People get liquidated every day and it's not chaos. Um, so you know, you you have say a million dollar BTC position and you have a h 100,000 of margin in there collateral, but uh you're down 50,000 or you're down to like your last five, like you're down 95,000, right? Or something like that, right? So you hit your your your maintenance margin level. Um, and that's the point where the system says like you

don't have enough money left to support this. You're too close to zero. Like it's not going to wait till you get to zero. It's going to wait till you're you're close to zero. You're too close to zero. I'm going to try to sell off this position. Um, and hopefully, right, like I'm we're not going to lose another $5,000 in it before we can sell it off. And hopefully we'll sell off to the market and the market will, you know, we'll pay some amount to transact. But like, you know, every everybody's happy. Um, maybe you're not happy you got liquidated, but like in general, in general, >> it works. The system works. >> It works. It works, right? And and so then though, the next step though is like, okay, what happens if the market can't absorb it either because you haven't been fast enough to liquidate

it? Like sometimes markets just move fast. Uh you know, Bitcoin goes down 20%. You didn't move fast enough to liquidate this guy and now the balance is minus $100,000 or uh you know there's just not enough liquidity in the market. Like you had these massive whales um right now. Um and right like I forget the size of the position the guy put it was like 110 million in margin but like hu huge positions right so market just isn't a lot of times liquid enough to absorb it. So like the the next step is like okay how you know if I sell if I drop this into the order book like right now or even if I try to work it like you know I'm going to have a price impact on this right like you try to move a big position you're going to move the market

um and so that's where once you start getting into uh you know um you know bankruptcy being right where the position if I tried to sell this off all right now I would be under zero that that's where the insurance fund stuff comes in in the ADL and like uh that differs a lot between exchanges. It's where you start get into interesting >> and the and the let's go let's talk insurance fund and then we can do ADL. So insurance fund um real or more of a marketing thing. >> Well I mean first of all that like most perplexis all the major I'm not sure about Aster but neither lighter nor hyperlquid actually technically have an insurance fund. They go straight into into ADL. So

like that's the first thing to understand. um real I would say real like the centralized exchanges they're kind of ky about so this all goes back to like BitMX right like >> were kind of invented by BitMX and we're all kind of like playing using the same playbook like 10 years later but like >> the original BitMX system is um >> they charge liquidation fees over time and that goes into this fund and that builds up and the idea being okay if you are liquidating someone and and and you force it into the market and there's this shortfall um the insurance fund steps in and says, "Okay, we're willing to make up we're willing to make up the difference." Um and so, right, that prevents ADLs from happening because, okay, it's like I'm

going I'm going to liquidate you. Uh I'm not going to recover any money. The insurance fund is going to make up the difference, but like I can keep doing the normal like temple of operations. Um the right like the perplexes have kind of taken a different approach where they they have these vaults like they have like HLP or like LLP at lighter. Um and the vaults will step in and take liquidation positions. Um but they won't they won't take uh they won't take people past bankruptcy. Like the vaults won't go in and actually like put money back into the system the way like a traditional like BitMX insurance fund works or Binance or OKX or Bybit. um you know, they'll step in at at a given mark price, but if for whatever reason the

price has moved and they'll provide a lot of liquidity, but if if the price has moved too much, the vaults will say like we're not going to take it. Uh we're not going to like take stuff at a loss and then they'll go straight in into ADL. So, uh you know, I think right like that is kind of the difference there. When you don't have an insurance fund and and markets are moving really fast, a lot of times you you jump right over. >> Yeah. I haven't even seen even even the sexes though like I haven't seen >> right that a lot of this plays off of BitMX like you mentioned like I I haven't seen any of the sexes use their insurance fund in in years. I mean I think Binance did something in 2019 when there was a BTC hack if I remember

correctly and but yeah I haven't really seen anyone do anything >> like a liquidation. Well that's is yeah because I know on Friday Binance did hit ADL like there were traders who got ADL that Binance um I don't know if the insurance fund stuff >> Okay. So, let's walk let's walk through ADL because I think a lot of people had uh never even heard of ADL until you posted this big Twitter thread out. Probably the most the most read docs over the weekend were the hyperlquid ADL docs. But yeah, maybe maybe you can walk through uh what this concept what this is. >> Yeah. Yeah. So, okay. So, the general like I guess the thing to understand about ADL is it's really actually doing two things technically like uh right you have like you have these derivatives markets and uh people are long, people are short. Um, but right at the end of

the day, like there's no actual BTC there. It's kind of all imaginary, right? So my ability to stay short is only there because someone is willing to stay long and was willing to put like margin and cash in, right? Like if there's no cash left in the system, there's no longs left in the system. Uh like eventually like you have to take the per the the uh the shorts out of the market and and vice versa. The market's going up a lot. So, uh, right, ADL is kind of like the last stop on the train on this liquidation cascade. Uh, and it's like this is what we do when we have, you know, there's no one left in the market. Um, like there's no one left or like who's willing to trade at this.

Um, and so we have to start forcing people out. Um, so that's like the the force out function. Um, and kind of the analogy there I I used uh in in my thread, which I guess people liked a lot was the specific analogy was that it's like an airplane, right? When an airplane's over booked, uh, normally the airline like starts bidding and you you get better and better deals. Uh, you know, 2,000 a seat, 3,000 a seat, like if you're willing to take the next flight. But if nobody takes that, like eventually they just have to pick someone and kick them off the plane or or not let them on, right? Because you there's only so many seats on the plane um and and you can't come on. So, so ADL's like if there are no more longs or you know in different cases or there no

more longs of certain prices uh we start forcing people out um and in you know different exchanges use different criteria but generally they look like something like whoever is made the most whichever positions are the most profitable and levered and maybe big like we start forcing those positions out quicker because uh we think like they're the most able to handle it and and then I guess the final thing just to keep in mind from ADL is this is also So how like ultimately the the the socialized loss component, right? So if if for whatever reason we haven't liquidated people fast enough or the market has just moved too fast and uh the uh the longser have enough margin to cover how much the shorts have made if Bitcoin wicks down to I don't know

$50,000 uh there's just not going to be enough money in the system. So ADL also instead of using a fair price, we'll use a bankruptcy price and we'll say uh like you know the position we're liquidating only has this amount of money. Um so we're going to fill it at at kind of this artificial price um just because this stops us from going going below zero. So uh yeah, there's kind of serves two functions there. Force out function and socialized loss function. >> So So you've got the plane analogy here. So you've got uh five extra seats on the plane. Who do they kick off the plane first? Is it the you know or maybe to use actual you know thisam this uh real situation here is like do they kick off the the most profitable trader because they want to kick them out of the

casino? Do they kick off the person with the largest size? Do they who are they kicking off? >> Yeah, they all have different uh different criteria. Uh but in general it's some combination of whoever is made whichever position is the most profitable, whichever position is the most leveraged and sometimes whichever position is the biggest. The biggest is kind of harder to do, right? Especially like in a perex context because like anyone can open a thousand different wallets. Um so Hyperlquit will do uh they have a formula where they take your your P&L um and your your leverage. So uh basically like and and BitMX used a very similar thing. Uh what was interesting about BitMX though was they actually showed you where your position was in the ADL que. So like they show

>> Yeah. the lights are all that hey here like you should Yeah. Um, and I think at least people were kind of that at least made people aware like that it was happening. Um, so so I do like kind of that having that in in the system. Uh, like even just like from a user perspective. Uh, so yeah, they kick out the most profitable people and the the idea there is like you've made a lot of money like you shouldn't like number one like it is kind of a haircut because that socialized loss component like we're filling you at a kind of a bad price but you know you've made a lot of money like you shouldn't really be complaining like you've just cleaned up. And then you also generally want to take leverage down when when markets are very volatile. Um because the problem is

right markets go down they can go back up. So if you're you're taking out uh shorts, right? Like you also the most levered people are kind of at the biggest risk of like causing more instability. >> Yeah. I I I think the thing that got so many people so upset this weekend, especially with Hyperlid, is that they weren't even that levered. They weren't they weren't 30x levered. They were you know I I'll read a message from a friend which says uh Hyperlid failed. I don't care what nonsense they preach. They just sold our funds eight figure position. Pretty much an existential day for pers in my opinion. Not sure how anyone can trade on them. You could have been on 1.2x leverage and fully liquidated, which is insane, right? So, I think the expectation is like, yeah, you know, if you're if you're 30x

levered, like you're taking risk and and you know that if you're levered up like 1.2x, two X like that's you you shouldn't be at I mean everyone's at risk of being liquidated but like >> you should be yeah you should be in the like if if they're going that far deep right like I I don't know like it's interesting I don't know how many I don't know if anyone's generated this but like what percent of the positions were were ADL um like eventually you're going to ADL everyone in the market like if you know things move bad enough like everyone's going to get ADL you're going to >> even if you're in profit right or even if you are yeah even if you're in profit you'll get ADL Yeah, even if you're even if you're in profit like like there are these criteria how we rank people, but

eventually uh like you need a way to shut down the entire casino, right? Like if Bitcoin goes to zero and never goes back up, like the market >> Okay, so this doesn't directly answer your question, but this is this is a little bit of data. Um okay, so open interest dropped 34% on Binance. OI dropped uh let's look at buy 39% on buyit and it dropped 55% on Hyperlid. So actually I'll turn that into a question like why did Hyperlid have the have Yeah. the most like 55% compared to Binance's 34%. Right. Why why did Hyperlid force more positions to close compared to other sexes?

>> Yeah. I mean that's also I I I think I saw the similar stats there. I was trying to like figure it out before before this actually I thought thought I'd have a better answer but like I don't think anyone really has a a strong answer here. But I mean the most obvious would be people I'm hyper liquid who just more levered. Uh you know that would be like the >> Yeah. And and that would make sense, right? Like um especially if people are doing like farming, right? Like you kind of want to lever as much as as much as pos, you know, especially if you're doing this delta neutral stuff, right? >> People are farming on other things. People are farming on edjax and lighter and aster and other things, you know, >> but but they're they're kind of double dipping, right? Because they're farming

on one and then hedging on the other, right? So, it's like you're trying to get your uh you know, you're trying to get your your hyperlquid whatever season two, season 3 airdrop, and you're also trying to get your your lighter points at the same time. >> Yeah, it's interesting. Maybe it's because Yeah. H Yeah, that's interesting. Um, in your mind, did Hyperlid do anything wrong, Doug? >> I don't think like anything obvious, like I I don't think anything obvious they did wrong. And the system like the system is very transparent. Like number one, they didn't lie to anybody. Like there nothing like they didn't lie as far as I know. Like nothing was covered up. Like everything worked as as it was documented. So if you read the docs um and like you know I I guess we'll have

to see but like as far as I know like nothing dishonest uh or anything like that. Like these are just like the markets do work that way. Uh like if you want to be critical of them like maybe one thing would be like they don't have an insurance fund and like okay you should have an insurance fund. Right. That's the debatable thing. Like people will say one thing or another. I think like optically it's not great that uh HLP is up like $40 million, right? When everyone's losing money, right? Like that kind of like even though you can like deposit, >> it feels bad, right? Like and and people especially like these are kind of like unfair things, right? Um, so I think right like if you had an insurance fund um and you know the insurance fund was taking some of that uh loss before

people are getting ADL I think that would be um that would be better. Uh there's more transparency. I I mean like the ADL criteria is there but like as far as I know it's not easy to like figure out what your position is in the queue or stuff like that. Um so right like I don't think anything like unethical for for sure at least like as far as we've we've seen publicly. Um I think like they operated fine, they documented everything. They're transparent, but uh you know people people might be a little unhappy there's no kind of insurance would be the main thing. >> Yeah. And and the idea of ADL I saw a lot of people being like we shouldn't have this ADL system. It's my and my take on that is like I mean you kind of need the system to function, right? You

either there's only two options here. You either have ADL and you trade permissionlessly um on things like lighter and hyperlquid and things like that or you or you have legal recourse and >> Yeah. >> And like Yeah. Which I mean we're trying to build this permissionless system like you you have to have a system like ADL, right? >> Yeah. Yeah. Yeah. I mean Yeah. You want to you want to sign sign a contract every time you open a position of perpet uh you know forming my ninth perex of the day. Here's my here's my passport. Um yeah, I mean like the real like e even trad even clearing houses will uh you know even trite clearing houses like they do like any derivatives like you need some rules like when something moves and there's not enough money left

to pay people out like there is going to be some waterfall system. Um >> you know it's just a question of how like how how safe is the system built before you get to those points. >> Yeah. So here's something I didn't know is that ADLs can be negotiated or negotiated away. I did not. That is a uh behind the-scenes backdoor thing I did not realize could happen. And um so I think one thing that struck a lot of people as unfair is Athena it seems like had negotiated for no no ADL or maybe like lower in the ADL priority list or something like that. And I think a lot of people my takeaway is like wow honestly really smart of guy and really smart of Athena. uh probably a little unfair because if you're that means if

you're trading on an you know a platform that Athena had negotiated lower ADLs with that means you are inherently lower you're higher yeah higher and so what is your thought on you know just negotiating ADLs generally >> yeah well I mean first of all from Athena's perspective it makes a ton of sense to do that >> super smart because the people most at risk of this are are Delta neutral traders, right? And Athena is a delta neutral trader. It like collects funding on it's short per long spot and collects this funding and and this is where kind of the system breaks down the ranking system because it says, "Okay, we're going to take our most profitable traders out first because they're doing

the best." But but if you're market neutral, you're like it doesn't actually reflect your position. And and this is where I think a lot of trading firms got hit because you were liquidated on your short leg and you're ADL on your long leg and like everything kind of blew up um for a lot of like trading firms here. Um so Athena right is doing kind of a you know very similar thing. They are a delta neutral trader. It makes sense if you're a delta neutral trader like you do not want to be in this system that is ranking you on criteria that doesn't really apply to you. Um, so it makes a ton of sense from their perspective.

From an exchange perspective, yeah, it's it's not great if it's not disclosed for sure. Um, and like to the like point, okay, should we be critical of Hyperlquid? Like Hyperliquid is very transparent here. Um, about what like you can go on their docs and see the formula. You could, you know, watch run a node or I don't know how easy it is, but like you could run a node and like check your exact position in the queue. Um, Binance like Yeah. like Yeah. like I I guess apparent or wherever sex that has this negoti I'm not sure if it was Binance where they negotiated it but you know whatever sex they have this negotiated at like it is uh probably something that should be disclosed to like >> Yeah. Yeah. I mean Binance clearly had special nonADL deals with certain counterparties and that that should be

you you when you trade on an exchange you expect it to be a neutral platform and um that yeah I think that stuff needs to get disclosed. So why did speaking of Binance why did Binance flush harder than others? Is that an issue with market makers? Is that a technical outage? Is that something else? >> Yeah, that's a good question. Um, I mean, I've I've seen a number and like talking to people like pretty active trading. Um, I think one thing, you know, I've I've heard is that their API was just lagging and slow. And I think technically, right, like in these conditions, if you're an automated trader, you have to move capital around um quickly to kind of balance things out. If like the the API isn't working, you can't connect. Like,

>> but how does how does Binance's API like not work in this moment, but it's been working? Is it that it's been working and now it didn't work? And as like just a technical glitch or >> Yeah, I mean, a lot of traffic, right? Like, uh, you know, if everybody's, you know, everyone's online at the same time trying to trying to trade, right? Like things are going to things are going to collapse eventually. Um, I yeah, I don't know. Like I I obviously I can't comment on like the inner working or their technical stuff, but yeah, like if it's not great if your API isn't working. Um especially if you're if you're a derivatives platform. If you're spot, okay, maybe okay. Um because like you can't trade if you're derivatives like you need to hedge, you need to post collateral. Like derivatives are constantly in motion. So uh a API not

great. And again, I don't know exactly how degraded it was. I just like this is what people keep saying. Um the other component of it is seems like a lot of alts got liquidated at Binance. Um and and this is like and in the spot side um you saw like uh what was like Adam you saw >> Adam went from $4 to one cent right >> one like literal one. >> Let me read some suie went from $340 to 50. Aposto went from five bucks to 75 cents. Se went from 28 cents to 7 cents. Link went from 22 to eight. Cardano went from 80 cents to 30 cents I think it is. Right. So you have you have these top 100.

>> Yeah. These are not small coins. >> Nuking top actually top 30 coins top 40 coins nuking 80% in three minutes. Right. So actually to turn that into a question like why why is that? Is that like that's not just an API? >> That's not normal. Nobody like Yeah. I mean, like, it's not normal. Like, people don't log in and be like, I'm gonna sell my atom out at 1 cent because >> like, what does this show What does this show you, Doug? Does it show you that it's like, oh wow, the the sex order books are just way thinner than we thought? >> I mean, I have a couple theories. Like, I I guess one theory I have here is like alts are pretty dependent on like market making arrangements for a lot of their liquidity. Like, Bitcoin, there's no like no one's getting paid to market

make. You're just you're just there. Um if you're in an alt like usually you know they're market making arrangements a firm is you know there and has a contract saying we're going to quote at you know x amount of liquidity at top a book like within 1% width or whatever like 99% of the time. Um but the key part is that like 99% of the time or 99.9% of the time and so they they the market makers have a little wiggle room there where they can kind of you they take that liquidity offline if they need to. Um, and like if you're going to use that 1% or 0.1% or whatever, uh, you know, Friday night's probably a good time to take it offline. So, uh, that would, if I had to guess, that would be a big part of it. When you have these

like market making deals, um, they the liquidity you have normally, it's like kind of in very stressed times. >> Is easy to disappear and you're dependent on one party like right like or maybe two, two, three, right? But you're not dependent on like a big ecosystem of of providers. So, what you're saying is it's all Wintermute's fault. >> It's so funny because I think uh you know, everyone when something like this happens, everyone's playing with Wintermute because Winterm's like the only market maker people that has like the >> brand it's the only one they know. Yeah.

>> Yeah. Yeah. There like you know 50 market makers there's like you know everyone just knows Winter Mute. Maybe GSR a little bit but >> yeah it's uh Yeah. And everyone was talking about, oh, did somebody blow up? It was on Friday night. Like, I think winter meat blew up. I was like, I doubt it was a winter meat. Like, >> I can assure you they did not blow up. >> Um Um, what do you think about So, there's this uh tweet from Chris, who's the CEO of Crypto.com. Here, I can pull it up. I don't know if you saw this, but um he said reg. Yeah.

>> Yeah. Regulators should look into the exchanges that had the most liquidations in the last 24 hours. Conduct a thorough review of fairness and practices. any of them slowing down to a halt, not effectively not allowing people to trade? Were all trades priced correctly and in line with indices? Uh, what's the setup for trade monitoring and AML programs? Are their internal trading teams fully Chinesewalled? 20 billion in licks. A lot of users got hurt. The job of regulatory bodies is to protect consumers and ensure market integrity. Um, what do you think of this? >> I mean, I I guess the first part like this seems like a subtweet of hyperlquid. Like I I don't I don't know Chris. I don't know really what he's but it seems like a sub tweet of hyperl you put a chart where Hyperliquids um at the top uh and right saying oh you got to

look into things that don't even necessarily like Hyperlid doesn't have an internal uh or at least like there's no indication they have an internal trading team. Um >> I would assume he's kind of subweeting Binance here but >> Oh, you think so? All right. I I don't know either. Uh may maybe so I again like I I I I don't really know Chris too too uh too much uh from his Twitter presence. Uh but yeah, I mean like a lot of this like it it sounds good like this all stuff sounds good, but like I don't think if you have like an effective AML pro like there may be good reasons to have an effective AML program, but I really doubt if you had like people's passport information uh and better like that's really going to prevent like an OI flush.

>> Oh ML programs. Yeah. Okay. He is subweeting hyper liquid. You're right. Yeah. Yeah. Yeah. Okay. >> Yeah. Yeah. Yeah. I mean like like people are lever like it doesn't it doesn't really matter too much uh you know there and I I I don't know like it just feels like right like uh these it's easy it's easy to just like criticize things um when they happen but again like Hyperl is very like transparent through through the whole process. So uh >> yeah. What did this tell you, Doug, about the um what did the price action of different coins tell you about the about the different coins?

>> Uh you know, that's easy. Oh, the coins that had strength or bounced back had uh you know, whatever. Just so many path dependencies. It's some guy got liquidated before somebody else and he happened to have more Adam than the other guy had something else and so Adam got liquidated >> on Binance first. Like >> but does it tell you anything about like the how like the organic bid bid on the spot basically? >> I I guess you could say that. I guess you could say, right, like if if uh you know, coins had dropped a lot and and just weren't there, right? You probably say more dependent on like market maker deal or like institutional liquidity. Um I guess like stuff that's very healthy

should be, you know, and has a lot of diverse liquidity should should kind of hold up. I I think that's fair, but like I I would like caution like reading too much into like when markets get chaotic like things just kind of move in random directions. So >> yeah. Um, what what are your thoughts on the insider trading stuff? So, right. So, there's this big whale that opened a >> opened a big short right right before this happened. Um, >> what are your I don't know if you have any >> What was the timing? Yeah, what was the timing? Some people said it was like five minutes. Other people said it was like 24 hours. Somebody said he's back now or to short. So, >> he's just back going up.

>> I think it was a,000 Bitcoin was transferred from a cold wallet to a hot wallet and like, you know, 20 minutes before it shorted it. >> Yeah. I mean, look, like if you're gonna if you're going to like I I guess crypto is the place to do it if if you know whatever there's going to be a tweet coming and I don't know how many people like many people in the circle like know, oh, there's going to be a like a bad Trump tweet and want to kind of position ahead of time. Um, >> yeah, >> it could be, you know, it could be a lot. Uh, if you're going to do it, it would probably be the place to do it. Um, I I don't really like it's it's hard to say for sure. Easy. These things are always hard to know for sure until you

kind of like catch someone in the act, I guess. >> Yeah, 100%. Um, uh, what Okay, let's talk oracles a little bit. I don't know. So, actually, uh, Omar from Chaos Labs has had a couple of good posts about this. Um it seems like the fact that USDE was a fixed rate oracle instead of a floating or you know floating rate oracle uh saved a lot of people a lot of money especially on something like a right so you kind of explain yeah can you kind of explain this dynamic?

>> Yeah. Yeah for sure. So I I think right like USD has become like a pretty big part of uh people have levered up a lot on it in in DeFi space. So right like you had plasma plasma has like these incentives out. You have a number of other incentives and and usually uh you know USD has like a lot of kind of big big incentives. So so kind of the the trade there has been to uh you know deposit you know USDC or your other stables um or or I guess other assets even um into you know a place like a borrow uh borrow borrow USD against your USDC collateral. take that out, put that on plasma. Um, and then kind of, you know, farm farm the incentives there.

And right, you want to kind of juice that up as much as possible. Um, and so like typically that's like looping. Um, you know, like most everybody knows looping these days and okay, I'm going to take USD, I'm going to deposit that as collateral again. I'm going to take out uh USDC, I'm going to, you know, run that. I'm going to, you know, take out lever up as much as possible. Um, and so like typically, right, like people do this quite a bit because like USD is pretty safe relative to USDC. So um you know you might only have like a 1% like margin there like a very small margin. Um and I believe on a this went way back and you know a is obviously the largest uh largest place to borrow liquidity. Um and I think there was this uh you know proposal way back saying well should we

use a market-based oracle for USD or should we use you know just hardcode it to uh to USDT. Um and and they did hardcode it to USDT. And I think the problem is if they had used a market based oracle uh you know on Binance USD was trading at like 65 cents or something. Uh so right like was there even a market for USD and like what would that have looked like? that would have been massive amounts of liquidations um in the DeFi like borrow lend space which you know obviously would not be great >> and and I guess that in turn the worst part about that is that in turn uh you know once you liquidate people you have you know deposit BTC ETH deposits in there that would have created sell

pressure on the spot side pushed the market down more. >> Yeah. >> Yeah. Exactly. So, I mean, wow. But yeah, very lucky that USD was hardcoded at one, right? Because it it it, you know, knocked down to I think what 65 cents on Binance on Binance. Yeah. >> Yeah. So, that would have obviously triggered a ton of liquidations. What um there's a there's a downside to this though, right? You can't just like hardcode all >> Yeah. >> stable coins. I don't know. How do you think about >> You could just hard code everything, right? Hard code BTC at like 120. That'd be great.

>> Yeah. Yeah. Like a fixed rate oracle is it's kind of a double-edged sword, right? like if if something actually is insolvent or if something actually deps >> you uh I don't know like imagine if we had like peg Luna in a bunch of these like lending pools. It's >> so I don't know how do you think about that? >> Yeah, the the market would I mean like like obviously at the end of the day like what a cares about is that the collateral in there um they can recover it or like you whoever's liquidating it can recover the value or take the value um there. And I I I think the argument like guy had a post um even just like a few hours ago this morning about like uh I think he even said like oh probably a one to one peg isn't like isn't great

because like there's no guarantee that USD is going to be like one to one USDT for like ever and always. Um but like a market maybe market priced oracle for uh Athena isn't great because you actually have like reserve assets. Um, and so right like you should maybe have a reserve oracle or or something that reflects the fact that you can redeem it. And and the problem with Binance was actually uh I think that Binance itself doesn't have a mint redeem function built into the platform and the API wasn't working. So people couldn't kind of take out the USD and run kind of that arbitrage. Um, but everywhere else like Bybit where you do have the mint redeem function or Curve which is on chain and you can redeem uh USD, right? like those

were working fine. Like curve I think barely deped at all and even buy bit was only like 93 cents >> or something. Um so so I think the argument here is is that for assets where you have the kind of this very mechanical redemption process uh the oracle should not necessarily reflect the market as much as like as long as that redemption process is still working. >> Yeah. Yeah. Um Doug, what's your maybe zooming out from a lot of the details of like oracles and stuff like what what what's your sense of how bad this really was? I think there's like two sides, right? One side is, wow, this was I mean, this was the worst liquidation in crypto history. It's gonna take a it's gonna take a long time to recover from this. The other is um you know, 15 to 20 billion in liquidations. That's not

actually 20 billion dollars that people lost, right? You could have had Yeah. You know, you could have had a thousand bucks in your account levered up, >> you know, to you know, 20 20,000. You lost the 20,000, but you didn't you didn't lose 20,000, you lost a you lost the underlying thousand, right? So there's not really 20 billion that was actually lost. How do you think of how bad this actually was? >> Yeah, I I think that's a good framing. Um I I think I largely align with that. I think like as you like you see in like finance like people is it financial systems like often times you can have like huge losses and financial systems are fine um as long as the people who are losing are kind of not like too big to fail or like too interconnected to fail or like whatever

whatever you want to say like a bank losing money and like bank depositors losing money is like way worse than like a bunch of hedge funds like hedge funds like very freely years right where like 2011 2016 right like where hedge funds just get like slaughtered in some trade and like it doesn't really affect the broader financial system. Like they're fine, they lose money and like maybe they risk off for a little bit. But like I as far as I can I don't think any like I don't think this is like 2022 was bad because you had like these lending like like you said Celsius these things where people thought they were super safe and then it turned out they weren't super safe. Um I I think when you really stuff that's perceived as safe or super safe and then that fails that tends to be a

lot worse. This seems like there are people who are pretty far out on the risk curve who have been doing pretty well and and it's terrible for them that they kind of got flushed out. Like a lot of people kind of wiped out, but like these are people are pretty far out on the risk curve and I don't think like they're really going to have a huge systematic effect. >> I just want to underline that. I think that's a super important point that you just said, right? Because I think I this isn't just hey leverage 2.0. This isn't like you know we had leverage in 2021 with you know Celsius and Nexo and Genesis and BlockFi. We have leverage now with the pers, but the difference is if you're levered up on pers, you know, you know that you're taking a risk. Now, you didn't realize that you're going to

get licked if you were at 1.5, but you know, you like those are those are risktakers as opposed to someone who had their assets on on BlockFi earning 8%. You you didn't understand the risk you were taking probably. >> Yeah. I mean, I think like you heard people in 20 Yeah. 2020 uh 2022 like talk about block like it was like a savings like regular people like oh I just put block like a savings account. Yeah like my bank I just replaced my credit union. >> Yeah. Um all right Doug we've got some questions from the empire audience actually that people were asking me telegram chat. So one of them is um okay this is a kind of a long longer question said I don't think I said can you guys talk about just what what

happened here at a really high level. I don't think it's acceptable that in 2025 exchanges handling trillions in volume simply stop functioning causing a flash crash of this proportion. What is likely to reme be remembered is the 1987 of crypto. It's hard to believe it got bigger than black swans like Co Lun and FTX. Um I get the industry has grown massively in size since then, but what is now a 20 billion liquidation day should not be the result of poorly managed infrastructure. Is that on purpose? Stop losses didn't hit. Delta neutral trades blown up on ADL mechanisms etc. Counterparty risk remains real uh these days even more and yesterday's events are the result of someone big going belly up. Maybe time will tell. Um personally I lost 90% of

what I had and it's my responsibility to hold myself accountable but in hindsight I thought we have made much more progress as an industry to prevent things like this from happening. Would love to just hear your comment on that. Yeah, I mean I think that's fair like certainly like that's yeah certainly not uh certainly very sympathetic to that. I think a lot of people were trading and and things weren't working certain right like perplexus went online uh I think just a lot of exchanges weren't functioning like hyperlquid I think hyperlquid actually worked I pretty well as far as I know but like right like the ADL mechanism wasn't super well understood um yeah I I mean yeah it's it's it's definitely a fair fair thing

like it's it sucks I think like a a lot of especially things not working are pretty bad because like like kind of mentioned before if you once you're in per space like you can't you can't just like turn off the system and come back like later and like everyone has their BTC and like you're fine and everyone has their USDC and it's fine and it's like spot um right things are constantly in motion so like if you can't move collateral you can't uh take your positions off you like you it's really bad being offline for a long time >> yeah should um one solution here would be circuit breakers right that's how it works traditional capital markets obviously should these major crypto derivatives markets have circuit breakers, right? And like what what that

allows for you to do is like one is like >> arbitrageers can come into the market and something like like should USD trade at 65 cents even even though Athena remained fully collateralized mint redeem functionality was operational but like there was this price dislocation and you just need a little bit of time and the arbitrageers came into the market and pulled it back to to to a buck. Um the other thing is it allows you it allows users to post more collateral, right? So give a little bit of time for people to react. Um what do you think of this idea of circuit breakers?

>> Definitely sympathetic to that. I think one challenge like crypto a major challenge is you markets are so decentralized that even if you turn off markets in one place uh right they're still going to be online somewhere somewhere else. Um and so right like traditionally in trend farming you have circuit breakers uh you know the whole stock market like right like turns off right it's not like NASDAQ turns off and then like NY keeps running or you like a lot of things like you can kind of regulators can kind of put those rules between everyone um it would be right like there there are kind of nuances there if I'm offline here but price discovery is still happening and the price is still dropping somewhere else like is that going to cause you know other problems

but generally like pretty sympathetic like I I think especially like to to your point when people can't even get collateral in like this isn't a pricing discovery issue. This isn't like a market risk issue. This is just like I can't I can't bid like something. So I think like having circuit breakers where at least people can like move collateral around makes makes probably a fair bit of sense for like derivative exchanges. >> Yeah. I guess the counter there's just no central clearing house like uh >> there's no Yeah, that is >> just there's so many platforms and so much liquidity fragmentation. It's like how Yeah. I don't I don't even know how you could do that.

>> Yeah. Yeah. I mean, you definitely couldn't force everywhere because you even I mean, you're going to have, you know, on the spot side, you're going to have like liquidity pools on chain like it is it is tough. Like, I guess you just shut down. You can say other people are running and, you know, we're going to we're going to open where we open. But, uh, yeah, it's it's definitely a thorny problem. >> Yeah. Okay. A few other questions from from the Empire crew. Uh, this is Dan Smith. >> I saw this one. Yeah. >> Yeah. Who's our head of data? So, uh Dan said, "Can you ask Doug about the impact of prop AMMs on onchain market structure? Does he view this as toxic liquidity that pulls quotes when volatility spikes and risk increases?

What does this mean for users? Can it be sufficiently offset with passive liquidity residing in traditional AMMs that serve as always on liquidity?" Okay, before you answer, can you explain his question for people who missed that? >> Yeah. All right. So, I I think like this is a really good question. And I actually didn't see the data until Dan Dan posted this earlier, but uh yeah, and so it looks like for for people that like maybe haven't been following like Salana Microstructure World as much, like these uh these kind of prop AMMs are are basically uh they're basically like one just one one market maker will sit there and and provide liquidity and and it looks like an AMM, but like unlike a traditional AMM where like anyone can kind of join the pool and provide liquidity, it's just one person,

right? and and they basically use like oracles, they they have something that they update very frequently. So, uh the problem with like traditional AMMs is like easy kind of pick them off when the prices move somewhere else. It's bad for LPS and these prop AMMs have kind of figured out a clever way to get around that. Um so, yeah, I think like in Solana world, they've taken over a lot of the spot liquidity. So, this is outside purpose world. um like a lot of the spot liquidity on Salana has moved into these crop AMMs and you don't see as much volume going through orca or radium or kind of your traditional AMMs anymore. Um uh so like they they've done very well because they're kind of they can be aggressive about pricing stuff. Uh I I do agree with Dan here, right? There is a kind of a problem here where it's just

it's kind of like a ecosystem level problem where these prop AMMs because of their structural advantages can be very aggressive about getting order flow and take it away from like traditional AMMs but they're they're kind of fragile and it's just one per like one person is behind or not one person one firm is behind sulfi one firm's behind humidify and like between those those are like you have two so you have two firms like providing a lot of liquidity firms you Market makers. >> Yeah, market makers. Yeah. Yeah. Yeah. It's maybe like an open secret who who the two tour, but I I won't say specifically because it might be mad at me, but um yeah, but like yeah, it's kind of open secret like these two firms behind these two market makers. Um and uh yeah, like if they decide for

whatever reason, uh they're, you know, you market volatility, but hung over in Saturday morning and provide liquidity, like the market's kind of screwed. So you're saying a platform like each of these AMMs basically has one market maker behind it and >> Exactly. Exactly. So like humidify is just one like you can't you can't like get on >> Yeah. It's like a front end for a for a market maker basically. >> Exactly. Exactly. It's just a front end for a market maker. Um, and so you know if it goes off like it it it kind of leeches away volume from the other like traditional AMMs and if if it goes offline like now you're kind of you don't have the prop AMM you don't have the traditional AMM so you don't have

any liquidity. Um so like that is >> that is a fair like criticism. Um the flip side is like they do give you know very very good pricing like >> during normal times like Solana market structure is great. >> Yeah. One more from from Dan. Um pretty interesting to see the significant spreads for ETHUSD across Ethereum base and arbitrum. Only only looking at the USDC uh USDT pairs. The price on base and arbitum basically mirrors Binance and Coinbase while the price on Ethereum mainet bottomed lower and stayed depressed for longer. Uh >> I actually didn't see this.

>> Well, I mean like here here's the reality like mainet isn't scalable. Um I don't know what what was like transactions on mainet uh Ethereum mainet where I don't know $1,000 at one point uh like to do a swap. So like yeah the market's going to be the market is not going to be efficient like during those periods right because because even if there's a even there's an arbitrage like you got to pay your gas fees um to do it let alone uh right so I mean like this is like kind of I you know this is kind of like what happens when you try to run you know very huge markets on uh chain that can do like 12 transactions per second.

>> Yeah. Yeah. Yeah. Fair enough. Um all right let's move uh maybe thinking about the future a little bit here. Doug, how um how many like do uh this idea of like dead bodies float floating to the surface here? Do you think anyone blew up? Um would it be a market maker? Would it be a delta neutral fund? Would it be a uh centralized exchange? What's what's your take on this? >> I think a centralized exchange would be pretty unlikely. Um I don't think right like by this I you never know. I guess you never know like where bodies are hiding but like as far as I could tell like right we don't like people aren't doing like FTX style stuff where they're like clawing about reserves or anything

like that. Um and if they are like >> trouble anyway >> or so I think if they are in trouble so it doesn't even matter like it doesn't like uh yeah so so I think um I guess knock on wood hopefully. Um yeah, I think a lot of like probably the good thing about like Carnage and Perex space is like a lot of the bigger players weren't really that involved in per Dexus because for various like regulatory reasons. Um so I think like you have a longer not a good thing like but like you have a longer tale of kind of market makers and trading firms on per Dexus. Um and so like if if some probably some did fail but like I don't think anyone like gigantic did as far as I can tell. Um, it's hard to tell, right? You never know, I guess, until

until stuff surfaces. >> When would it surface in your mind? >> Yeah, it would probably be, if I had to guess um I think you'd see the nice part when things are on chain is you can kind of see what people have lost. But if if people had like credit arrangements like this is kind of going back to 2022 like I don't know what these firms credit arrange so someone's doing you know has a 100 million on hyperlquid and maybe they're down 30 million like at least on chain they look fine um but you know maybe this is a firm that borrowed 90 million you know from someone else to provide it so like they would be kind of in trouble uh you know when they when

they get the phone call it's really the stuff that takes a while or is like stuff that has to go through like legal the legal system So, you know, this is unfortunately stuff we we can't really see on chain. >> Yeah. Yeah. It'll be interesting. There's probably some like delta neutral funds that, you know, because uh oftentimes these delta neutral funds are not as well known as the like pantas and dragonflies of the world. They're uh they're quite large, but you know, oftentimes just they don't do they don't do the marketing that the VCs do. So, yeah. Yeah, we'll see. Um, anything else we haven't talked about, Doug, that you think is interesting from this?

>> Yeah, it's a good uh it's a good question. I mean like I I I think the most interesting thing here is just it's you know this is really kind of a good chance to like explore how uh you know how like ADL are very like kind of what the limits of derivatives are and like this is like kind of a topic people don't think about in normal times because derivatives are happy but like you know all the whole waterfall thing. Um I think we covered that pretty well but that that to me is just kind of the most fascinating part of this and kind of the cool part about crypto is you can experiment a lot quicker. So, it's kind of interesting to see.

>> Who are the winners of this crash? Would you say? >> I don't know. This is like >> I think a lot of times in crypto you think there's like stuff like this happens. Uh but it's just kind of bad for like especially like we're so hyper online. You're like, "Oh, you know, so and so did better, someone else did worse." But like for the average like retail user who like you know is has a day job actually something outside crypto like it it just doesn't doesn't look great um for anybody I think. So I don't know. think this crap like people don't a lot of my like you know when FTX blew up like a lot of my normie friends were like yeah oh my god like FTX blew up or even when Luna they're like oh my god I heard this there's this like big

scam in crypto because there's no like I don't have people being like oh my god like Binance's oracles were uh you know mismanaged oh my god the ADL system on Hyperlid like seems pretty intense like I you know actually people a lot of people my friends didn't even know that this that this happened like there's very little text. Um, >> yeah, that's actually true. Yeah. >> Yeah. Um, so we'll see. Uh, anything else? >> No, I think that's uh that's that's a good conversation. We covered a lot.

>> Good. Doug, what are you working on these days? >> Yeah, so we're actually we're actually building a per deck um at uh at at Ambient. We were a spot amm for a while. We're doing a per so I don't know if it's good or bad. We weren't live uh for for this, but at least we get to we get to learn a lot. >> A little lucky get to learn. So, what do you learn as someone building a perp deck? Like what's the takeaway here? I think we're we're thinking a lot about like this whole ADL thing kind of what we talked about uh where like h how do you like you you do have to ADL people but is there a way for people to kind of uh like especially for delta neutral people is there a way to like you know do more smarter criteria um or or like

people say hey like either you know flag it uh you know opt into a system with like better protection and I think keep everything transparent. So we're thinking a lot about that especially after this. The uh the other component is I think we're also thinking a lot about an insurance like insurance system. We're kind of always planning to do that but no like as far as I know no like major onchain perex really has an insurance fund. I think like this kind of reveals that you need somewhat of an insurance buffer in there between uh between the vault and and everything else. So yeah, it's uh it's it's fun though. like perplex is there there's so many different like mecha that you can go into perex space. So it's it's been

really cool kind of work on that. >> We didn't talk about lighter. What happened with lighter? What it sounds like lighter mechanism broke or something like that? >> Uh well they went a couple of things. It went offline for a few hours which is uh not great. >> Can't do that. >> Yeah. >> No, you can't do that. Um, I think they had less ADL. So, like people were, you know, people were uh the the lighter maxis and the HL maxis are are kind of battling on Twitter now. And HL Maxis say well like uh you know the ADL's necessary and lighter maxis say well uh you know oh the lighter vault their vault lost a lot of like 5% or something um in one day which is which is not

great um because vault's supposed to be kind of a a super safe product. Uh people are saying well the flip side is they don't have as much ADL and I think like people are kind of oversimplifying uh the trade-offs here but it does seem like the hyperlquid has kind of moved away from this system of providing liquidity um through the vault and and lighter is still providing a lot of liquidity. So, so I think like one flip side there is like their system did kind of remain more liquid at the bottom of the licks um there. But uh but yeah, like obviously people lost money because of that.

>> Yeah. All right, Doug. Appreciate you, man. This is great. Thanks for breaking it all down for us. Um yeah, rooting for you. And so people can't trade on Ambient yet? >> Uh no. So we're we're building on uh on Fogo uh which is kind of a new high-speed network. So the should be should be uh say around next month. >> Nice. Nice. >> Yeah. So yeah, check out Fogo. Check out Ambient uh Fogo Chain and Ambient Finance or Twitter handles. So >> cool, Doug. Appreciate it. All right, everyone. Thanks for listening. Uh I think tomorrow we are releasing an episode uh with the Cali founder uh TK.

Um so that should go live. Oh, let me get Sorry, I'm getting some calls. Uh yeah, that should go live tomorrow. Um, and then actually the big acquisition because of the market turmoil, the big acquisition uh recording that we were going to do got pushed to next week. So you'll have to stay tuned for that. But yeah, thanks for listening to Doug and me break down this uh all the market turmoil and enjoy KHI episode tomorrow. See you folks. >> Thanks for having me.