Phase 3 introduction

What this phase establishes

The first two phases treated price as a randomly changing number. This phase opens its internals: order books, liquidity, market makers, venues, derivatives, and liquidation.

You will understand why your market order costs more than the screen price, why the same order costs more late on a weekend, why an exchange lets you hold a full position with a fraction of its value deposited, and why declines often accelerate faster than anyone expects.

It is also the first phase targeted by the 3D edition: order books, liquidity, leverage, and liquidation cascades account for four of the six 3D MVP simulations.

Six chapters

Phase project: Crypto Market Structure Report

Choose a token (BTC, ETH, SOL, or a smaller token you follow) and write a market-structure report. Date and source every number. No orders or account login are needed.

1. Where it trades (Chapter 16): centralized exchange spot and perpetuals, and on-chain pools. Give two or three actively traded venues in each category.
2. How deep it is (Chapters 13 and 14): record “±2% depth” from two public order books; calculate average fill prices and slippage for $10,000 and $1,000,000 buys.
3. How large an on-chain pool is (Chapter 16): record both reserve quantities in a major pool; estimate impact for the same notional using “twice the purchase amount ÷ dollar reserves in the pool.”
4. How crowded derivatives are (Chapter 17): perpetual funding, annualized basis of a dated future, and recent open-interest changes.
5. How a decline might amplify (Chapter 18): combine depth and derivative crowding to describe what might happen after a 5% price drop.
6. Conclusion: roughly what is your maximum single order in this market? Where should it execute? Under which conditions would you pause?

Copy this outline:

# <Token> Market Structure Report (observed: YYYY-MM-DD HH:MM)

## 1. Venues
- Centralized exchanges:
- On-chain pools:
- Perpetuals:

## 2. Depth and slippage
| Exchange | ±2% depth | Slippage buying $10,000 | Slippage buying $1,000,000 |
| --- | --- | --- | --- |

## 3. On-chain pool
- Pool:      Reserve quantities:      Estimated impact ($1,000,000):

## 4. Derivatives
- Funding:      Annualized basis:      Open-interest change:

## 5. If price falls 5%

## 6. Conclusion
- Maximum single order:
- Execution venue:
- Pause conditions:

Knowledge nodes

Self-test before skipping

If you have live trading experience and answer all six correctly, you may start from Phase 4.