Feng Yu
Posted on Sep 11
AI-assisted
In my last article I described the margin spiral — leverage feeding on itself until a correction becomes a crash. This one is the same loop, one level down, in the plumbing of the market. The actors aren't leveraged funds this time. They're the market makers who are supposed to keep prices smooth. And their mechanical hedging, in a selloff, does exactly the opposite: it manufactures the crash they're paid to absorb.
Here's the setup. On September 7, 2026, my market-state module read:
