Curriculum·S207 Investing Frameworks (Unleveraged)·about 41 min
The drawdown math
By the end of this lesson you can
- →Compute the gain required to recover from any drawdown, and read the asymmetry it creates
- →Explain why the recovery requirement grows faster than the loss
- →Determine the maximum drawdown a position size can produce, before taking it
- →State the drawdown you can actually tolerate, in currency rather than in percentage
Sophomore · enrolled learners
This lesson opens with 1.6 million accounts, 10 October 2025.
- What happened
- More than $19B of leveraged positions was liquidated within 24 hours, by Coinglass data, which CoinDesk Research called the largest single-day event on record, against perpetual futures open interest of about $217B. A narrower count by the data firm Amberdata found $9.89B of forced liquidations, about 70 percent of it inside 40 minutes, with a peak minute of $3.21B of which 93.5 percent was forced selling. CoinGecko reported more than 1.6 million trading accounts liquidated, without naming its data source, and put bitcoin down about 14.5 percent and ether about 12 percent. For an unleveraged holder those moves were an unpleasant day. For a leveraged one they were terminal, because a liquidation converts a temporary drawdown into a permanent one by removing the position before any recovery can occur.
- The decision point
- The move itself was survivable and has occurred repeatedly in this asset's history. What was not survivable was the position size relative to it. A drawdown you hold through is a number on a screen; a drawdown that liquidates you is realized, and the difference between those two outcomes was decided before the day began, by sizing.
- Recorded loss
- $19,000,000,000
What you will be able to answer
- →What gain recovers a 50 percent drawdown?
- →Why is the asymmetry structural rather than psychological?
- →What converts a temporary drawdown into a permanent one?
- →How should you state your drawdown tolerance?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.coindesk.com/research/market-spotlight-the-19-billion-liquidation-that-shook-crypto
- https://www.kaiko.com/resources/how-3-21b-vanished-in-60-seconds-october-2025-crypto-crash-explained-through-7-charts
- https://www.coingecko.com/learn/october-10-crypto-crash-explained
- https://www.dalbar.com/PressReleases/doc/2025QAIBPressRelease.pdf
- https://www.coindesk.com/tech/2022/02/08/axie-infinity-reduces-slp-emissions-to-prevent-collapse
- https://www.coingecko.com/en/coins/smooth-love-potion
Confidence high·Volatility low·Reviewed 2026-08-06·Owner unassigned
Contested
S201-01 uses 10 October 2025 for order book depth and S203-01 for what a bar discards. This lesson uses it for the sizing consequence. Keep the split.
The figures for the day come from different counts and do not reconcile. The $19B total and $217B open interest are CoinDesk Research citing Coinglass; $9.89B, the 40-minute window, the $3.21B minute and 93.5 percent are Amberdata's narrower count (its report is now hosted by Kaiko, which acquired it); the 1.6 million accounts and the 14.5 and 12 percent price falls are CoinGecko, which names no source for them. Attribute each figure to its count and never mix them in one sentence as if they were one measurement.
This course is unleveraged. Leverage appears here only as the mechanism that converts a drawdown into a liquidation, and R403 owns its treatment. Do not let a revision introduce leveraged strategy content.