A liquidation cascade is not random volatility — it's a mechanical sequence with identifiable inputs, a predictable structure, and observable preconditions. This episode builds the cascade mechanism from first principles so traders can see the conditions developing before they happen.

The mechanism: traders cluster at similar leverage levels targeting similar price zones, creating dense liquidation bands. When price moves into a band, multiple positions liquidate simultaneously, creating directional pressure that pushes price deeper into the band, triggering the next wave. The episode covers the four factors that determine cascade severity: OI concentration, average leverage, market depth, and crowded directional positioning (identified by funding rate signals). How to read cascade risk in real time: funding rate as early warning, how marke ...