Evolution: dark pools and order internalization

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.

Links +Resources:

• Ambient Finance on X (Twitter): @AmbientFinance
• Website: https://ambient.finance

Sponsor of Chat With Traders Podcast:

●       Trade The Pool:  ⁠⁠http://www.tradethepool.com⁠⁠

 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.

Learn more about your ad choices. Visit megaphone.fm/adchoices