In this episode, we examine what actually happens when crypto markets break — how leverage builds beneath the surface, liquidity disappears, and liquidation cascades turn volatility into systemic failure.

Doug Colkitt, a quantitative trader and DeFi builder whose experience spans both traditional finance and crypto market structure. Doug began his career on Wall Street at Citigroup before moving into high-frequency trading at Citadel during the 2008 financial crisis. He later built and traded his own systems across futures, volatility products, and international equities, including running a major market-making operation in Turkish stocks.

Today, Doug focuses on crypto and DeFi infrastructure, working with perpetual futures, liquidation mechanics, and exchange design. We discuss why traders still get wiped out when they think they’re hedged, how liquidation cascades accelerate, and what recent market failures reveal about leverage and market structure under stress.

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 Time Stamps:

Please note: Exact times will vary depending on current ads.

00:00:00  Intro and Background

00:03:43  Starting Individual Trading and High Frequency Systems

00:04:09  Focus on Index Futures and Competitive Markets

00:06:15  Michael Lewis's 'Flash Boys' and HFT Accuracy

00:07:00  Impact of HFT on Smaller Traders

00:09:13  Market Makers and Price Competition

00:09:37  HFT Evolution and Market Dynamics

00:11:24  Trading VIX Futures and Market Inefficiencies

00:13:08  Transitioning to Medium Frequency Trading

00:13:34  Trading Turkish Equities and Market Makings

00:15:35  Exploring Cryptocurrency Trading

00:18:32  Diving into Decentralized Finance (DeFi)

00:20:06  Arbitrage Opportunities in Crypto Markets

00:22:00  Flash Loans and Risk-Free Trading

00:22:48  Adjustments to Trading Bots Over Time

00:25:11  Criteria for Trusting Decentralized Exchanges

00:28:46  Liquidity Providing and Yield Opportunities

00:29:16  Volatility and Risks in Liquidity Provisioning

00:31:47  Understanding Perpetual Contracts in Crypto

00:36:04  October 10, 2025 Crypto Massacre Overview

00:37:36  Leverage and Market Dynamics

00:41:23  Impact of Liquidations on Market Sentiment

00:41:43  Market Maker Behavior During Crises

00:43:45  Liquidity Issues in Centralized Exchanges

00:44:53 Hyper Liquid Vault and Liquidation Dynamics

00:45:55 Market Making Strategies and Risk Management

00:49:15 Insurance Fund Models in DeFi

00:51:43 Ambient Finance Project Overview

00:53:08 Separation of Exchange and Clearinghouse

00:54:14 Innovations in Perpetual Trading

00:55:46 Takeaways from the October 10th Massacre

00:57:03 Future Plans for Insurance Fund Integration

00:58:28 Real World Assets and Crypto Integration

Trading Disclaimer:

 Trading in the financial markets involves a risk of loss. Podcast episodes and other content produced by Chat With Traders are for informational or educational purposes only and do not constitute trading or investment recommendations or advice.

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