Paul Faulkner
Working Papers
Peer‑grade forensic methodology applied to monetary economics, market microstructure, and protocol‑level claims. Every paper timestamped, version‑controlled, and accompanied by full data appendices. No forecasts. No advice. Only what the evidence demands.
Forced Liquidation Cascades in Unregulated Perpetual Futures Markets
The first forensic longitudinal analysis of systematic liquidation extraction in unregulated cryptocurrency perpetual derivatives markets. Using a 365‑day primary dataset (1 March 2025 – 28 February 2026) across eleven exchanges, we document $176.6 billion in forced position exits at an average rate of $484 million per day. The paper introduces five original metrics — Extraction Efficiency, Cascade Efficiency, the Leverage Kill Zone, the Matched‑Asset Ratio, and the VaR Breach Multiple — to characterise the structural properties of this mechanism.
Principal findings: a statistically significant long‑position bias (65.1% of all forced exits) operating independently of market direction; a Leverage Kill Zone demonstrating that 100x leverage positions were at intraday liquidation risk on 96% of all trading days; and a 4.7x exceedance of the prevailing 99% Value‑at‑Risk threshold during the October 10, 2025 cascade event ($19.25 billion in 24 hours). The paper documents structural failures in standard parametric VaR for this asset class and provides the first empirical characterisation of the funding rate as a leading indicator of cascade risk.
52 pages · 14 tables · 10 principal findings · Full dataset attached on Zenodo.
Description Without Prediction: A Methodological Critique of Bitcoin Price Power Law Models
This paper identifies nine methodological concerns across two prominent Bitcoin price power law analyses: a widely circulated retail Monte Carlo simulation and Santostasi & Perrenod (2026), “A Mechanistic Derivation of the Bitcoin Price Power Law.” Both analyses demonstrate that Bitcoin’s price history from 2010 to 2026 is well described by a power law with exponent approximately 5.69. Neither establishes that this relationship constitutes a forward‑binding structural constraint.
Key critique: residual stationarity demonstrates historical consistency but not causal necessity; the composition identity is algebraic necessity, not independent evidence; the Bayesian stability analysis applies a conjugate update to autocorrelated rolling estimates as though they were independent draws, artificially compressing posterior uncertainty by a factor of approximately 5.6; and no out‑of‑sample validation is provided. The paper concludes with a five‑stage pattern analysis and a diagnostic checklist for identifying when quantitative models have crossed from empirical description into unfalsifiable advocacy.
19 pages · 9 methodological concerns · 7‑point diagnostic checklist.
In Preparation
The Ghost Rally
A multi‑deflator forensic audit of Bitcoin holding‑period returns across four entry points spanning two market cycles (2017–2026). Returns are measured against CPI (headline & core), M2 broad money supply, and the Bitcoin‑to‑gold price ratio — reported in a systematic matrix without composite aggregation.
The Recursive Paretian Discipline
The observation that a minority of causes generates a majority of effects has been absorbed into management folklore for a century. Its recursive extension — applying the same distributional logic iteratively to the output of the first pass — has been noted in scattered papers but never unified into a single transmissible, domain-agnostic methodology. This paper makes four claims. First, the intellectual lineage through Pareto, Juran, Mandelbrot, the power-law literature, and Meadows’ systems thinking is precisely examined and the exact point at which each tradition halts before the recursive step is identified. Second, recent formalisations — Hippeläinen (arXiv:2602.11131, 2026), the ResearchGate fractal diminishing-returns model (2024), and Stan’s Pareto Cube (SSRN/Zenodo, August 2025) — are incorporated and shown to capture the mathematical substrate but not the procedural discipline.
Core contribution: we define the Recursive Paretian Discipline (RPD) as a unified protocol — iterative application of a Pareto mapping to its own vital subset, justified by the threshold-stability property of the Pareto distribution, governed by formal stopping criteria with operational defaults (Efficiency Floor, Stability Test, Information Entropy), bounded by an explicit domain of validity, and demonstrated across corporate strategy, financial forensics, academic research, and personal decision-making. The psychological and institutional mechanisms by which the recursive step is reliably suppressed are treated as a substantive explanatory puzzle, incorporating Cho & Critcher’s (2025) experimentally documented doubling-back aversion. Synthetic data over 30 replicates confirm the cascade behaves as predicted under Pareto generation and fails distinctively under Gaussian and exponential generation.
25 pages · 3 formal stopping criteria · 8‑point research agenda · 6 steelmanned counterarguments · Appendix A synthetic validation (N = 100,000 × 30 replicates).
