Understanding Auto-Deleveraging: The Hidden Mechanism That Can Slash Crypto Perpetual Profits
Auto-deleveraging (ADL) acts as a critical fail-safe on cryptocurrency perpetual futures platforms, stepping in to reduce winning positions during extreme market stress. Doug Colkitt, founder of Ambient Finance, recently clarified how ADL functions and why even experienced traders may find its impact surprising. Perpetual futures, often called “perps,” are cash-settled derivative contracts without expiration dates. They closely track the spot market through periodic funding payments rather than physical delivery of coins. Unlike traditional asset trading, both profits and losses on perps are settled against a shared margin pool, not through actual transfers of cryptocurrency. This setup requires exchanges to rapidly












