Purpose
Produce a precise, decision-ready explainer that takes a crypto derivatives concept — a perpetual swap, a leverage tier change, a funding spike, a basis blowout, or a liquidation cascade — and translates it into the mechanics, the math, and the concrete risk exposures it creates for the platform and its users. Closes the gap between desk-level fluency and the working understanding a risk, compliance, or product owner needs to set policy.
When to Use
Invoke this skill when the user asks to:
- Explain how perpetual swaps, funding rates, or mark price work to a non-trading stakeholder
- Walk through what happens during a liquidation cascade and how the insurance fund and auto-deleveraging interact
- Clarify leverage tiers, initial vs. maintenance margin, and how margin calls trigger
- Explain a basis dislocation between perp price and spot/index and what it signals
- Brief compliance or product on the risk exposures a derivatives feature introduces before launch
- Post-mortem a specific market event (funding spike, liquidation wipeout, basis break) for internal review
Inputs Required
Before starting, collect:
- Topic or instrument: The specific concept or event to explain (e.g., perpetual swaps, funding rate spike, ADL event)
- Audience: Who reads this — risk manager, compliance officer, product manager, or exec/board
- Decision context: What the reader needs to decide or do after reading (set a leverage cap, approve a launch, file a report, etc.)
- Platform model: Whether this is for the platform's own product, a competitor analysis, or general education
- Existing knowledge level: Beginner / intermediate — how much crypto-native vocabulary can be assumed
- Specific event details (if event-driven): Date, instrument, price levels, funding numbers, or liquidation figures involved
- Risk lens priority: Which exposure matters most — counterparty, market, operational, liquidity, or regulatory
If audience or decision context is missing, default to a risk manager who needs to set or revise a policy, and note the assumption.
Instructions
Step 1: Frame the Instrument or Event
Open with a 2–3 sentence plain-language definition of the topic, then anchor it with one concrete numerical example using realistic figures. Do not assume crypto-native vocabulary unless the input specifies intermediate knowledge — define terms like mark price, index price, funding, and maintenance margin on first use.
State explicitly: what this instrument or event is, what it is NOT (a common misconception to clear), and why a risk/compliance/product reader should care.
Step 2: Explain the Mechanics with Math
Break the topic into its working parts and show the arithmetic. Match the breakdown to the topic:
For perpetual swaps: Define the perp vs. dated future distinction, the role of mark price vs. last traded price, and how the contract stays tethered to spot via funding. Show a worked funding payment: position notional × funding rate × interval.
For leverage and margin: Show initial margin, maintenance margin, and the liquidation price formula. Walk one position from entry → margin call threshold → liquidation with actual numbers. Explain leverage tiers (margin requirement rising as position size grows) and why they exist.
For funding mechanics: Show how the funding rate is computed (premium/interest components), the funding interval, and who pays whom in contango vs. backwardation. Demonstrate how a sustained positive funding rate creates a carrying cost that can force position exits.
For basis dislocations: Define basis (perp − index, or future − spot), show how it's expressed in annualized terms, and explain what a widening or inverting basis signals about leverage, sentiment, and liquidity stress.
For liquidation events: Walk the cascade: a price move pushes positions to liquidation price → forced liquidations sell into the move → price drops further → more liquidations. Explain the role of the insurance fund, socialized loss / clawback, and auto-deleveraging (ADL) as backstops, and the order in which they engage.
Step 3: Map the Risk Exposures
Translate mechanics into concrete platform and user risk. For each relevant lens, state the exposure, the trigger condition, and the magnitude driver:
- Market risk: Where price moves create losses and how leverage amplifies them
- Counterparty / platform risk: Where the platform absorbs loss (insurance fund depletion, bad debt, ADL on profitable accounts)
- Liquidity risk: Thin order books amplifying liquidation cascades and slippage
- Operational risk: Oracle/index manipulation, mark price gaming, system latency during volatility spikes
- Regulatory / compliance risk: Leverage limits, retail suitability, disclosure obligations, jurisdiction-specific bans
Prioritize the lens named in the inputs; cover the others briefly.
Step 4: Surface the Decision Implications
Connect the explanation directly to the reader's decision context. Provide 3–5 specific implications framed for action — e.g., "A maintenance margin set at X% means a Y% adverse move liquidates the position; setting it lower transfers risk to the insurance fund." Each implication should name a lever the reader controls.
Step 5: Provide Watch Signals and Thresholds
List the concrete numbers and conditions that should trigger attention: funding rate magnitudes, basis spreads, insurance fund balance ratios, liquidation volume spikes, frequency thresholds. Give realistic threshold ranges, not vague guidance.
Output Format
- Structure: Definition → Mechanics with worked math → Risk exposure map → Decision implications → Watch signals
- Length: 800–1,200 words
- Format: Structured document with clear section headers; worked examples set off as labeled calculations; risk exposures and watch signals as scannable lists or a short table
- Sections: What It Is (and Isn't) → How It Works (with math) → Risk Exposures → What This Means for Your Decision → Watch Signals & Thresholds
- Tone: Risk officer briefing — precise, sober, numerate, free of hype or trading-floor swagger. Defines jargon, never assumes it.
Quality Checklist
Before delivering output, verify:
- [ ] At least one worked numerical example with realistic figures is included for the core mechanic
- [ ] Every crypto-native term is defined on first use (mark price, funding, maintenance margin, ADL, basis)
- [ ] Risk exposures are tied to specific trigger conditions — not listed as abstract categories
- [ ] Decision implications each name a concrete lever the reader controls
- [ ] Watch signals include specific threshold ranges, not "monitor closely"
- [ ] The explanation states what the topic is NOT (a misconception cleared), not only what it is
Notes
- Liquidation cascades are the highest-stakes topic for most platform readers — the insurance fund and ADL backstop logic is where risk and product decisions actually live, so default to extra depth there when relevant.
- Funding rate and basis explainers are most useful when the worked example uses a sustained period (e.g., funding paid every 8 hours over several days) so the reader feels the compounding carry cost.
- When the request is event-driven (a post-mortem), lead with the timeline of what happened before explaining the mechanics — the reader needs the narrative anchor first.
- Keep regulatory commentary descriptive of risk categories; this is not legal advice and should flag where formal legal/compliance review is required.
How to use this skill
This file is a Claude Code skill in Anthropic's standard format — markdown with YAML frontmatter at the top.
Installing in Claude Code:
~/.claude/skills/<folder-name>/SKILL.md— auto-loads in every session anywhere on your machine (recommended for skills you'll use across multiple projects)<your-project>/.claude/skills/<folder-name>/SKILL.md— auto-loads only when working in that project (recommended for project-specific skills)
Restart Claude Code or open a new session to register.
Using in Claude.ai, ChatGPT, Gemini, or other AI tools:
- Drag this file into a new chat, or copy and paste its contents
- Send your task or request as your next message — the AI will apply the skill where it fits
For Claude Code skill details: https://docs.anthropic.com/en/docs/claude-code/skills