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This is why you get this price chart for inverse perpetuals during a big price spike ...pic.twitter.com/aQOPGqv0AM
Assume 100% collateralized trading:
Inverse futures:
1.
collateral long & position long = 2 X long lev
2.Collateral long & position short = fully hedged
Linear futures:
3.Collateral Short & position long = fully hedged
4.Collateral Short & position short = 2 X short lev
Now imagine 100X lev on #1 above!
You’re also at the mercy of the exchange liquidation engine which varies drastically across exchanges. FTX reduces your positions as little as possible. Binance markets out all at once for total loss and market impact.
What's your take on asset-margined OI going down and fiat-margined OI going up? If the market realizes your analysis above, it could mean longs are building because it is safer to hold a long position with fiat margin. BUT if you want more short leverage, you would also do that.pic.twitter.com/vTlpP4pHHc
Asset margined futures were used by basis traders as an efficient way to arbitrage the futures vs physical. Now that the futures basis has collapsed there’s not much reason to hold the inverse futures rather than the much simpler linears.
Maybe it just points to risk-off mode.
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