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In today’s #Digital asset landscape, a few major centralized trading platforms dominate global trading volume. These platforms operate both spot and derivatives markets — with the latter playing a much bigger role in short-term price movements. Unlike traditional investing, the derivatives market, particularly perpetual contracts, allows traders to open leveraged positions using borrowed funds while locking in only a portion of the trade as collateral.

The daily trading activity in perpetual futures is nearly 80 to 90 times larger than that of spot markets. Due to this massive scale, perpetual contracts largely dictate asset prices across the market. These platforms make revenue by offering high-risk leverage products and partnering with professional liquidity providers (market makers) to generate artificial trading volume and price movements. These same market makers are often used to trigger liquidation cascades — forced closing of trader positions — to amplify volatility and increase platform earnings.

The structure is currently under regulatory review. In jurisdictions like the U.S., upcoming regulatory frameworks such as the Clarity Act and Market Structure Reform aim to bring more transparency, restrict market manipulation, and limit the use of excessive leverage. However, it will take time for these laws to be enforced globally, especially in regions where many of these exchanges operate offshore.

Until such regulation is fully in place, smart traders should understand how global liquidity trends affect the market on longer timeframes, while on lower timeframes, monitoring key liquidation zones can offer insight into short-term volatility. Much of the market’s movement today is not purely organic but rather manufactured by internal systems designed to manage risk and generate profit.

For example, when strong economic or positive crypto news hits the market, many retail traders instinctively open long positions expecting a rally. This gives the exchanges an incentive to push prices down, triggering stop losses and liquidations. The same happens in reverse — if sentiment is overly bearish, the market often spikes upward to flush short positions.

It might feel counterintuitive, but recognizing these cycles gives traders an edge. Rather than reacting emotionally, one can plan entries at the low points of these engineered sell-offs — essentially capitalizing on price inefficiencies until structural reforms reshape the market.