$FOLKS FOLKS coin surges, the fundamentals behind the rise, and market narratives.

Any significant price movement requires a "story" to drive it. Recently, FOLKS has supported several strong market narratives:

1. Major Product Upgrade: Recently launched a native cross-chain lending marketplace, allowing users to seamlessly lend across different blockchains, greatly enhancing the platform's practicality and appeal.
2. Compliance Progress: Collaborated with licensed virtual asset service providers to launch regulated CeDeFi applications, combining the compliance advantages of centralized finance with the efficiency of DeFi.
3. Ecosystem Expansion and Data Positive: Project extended to multiple blockchains including Monad, and achieved a milestone of over $10 million in locked value on Monad, indicating user growth and capital inflow.
4. Capital Recognition: Recently completed a new round of financing, with a significantly higher valuation than before, sending a strong confidence signal to the market.

I. Core Operations and Amplification Mechanisms in the Contract Market

Based on the above positive fundamentals, the contract market amplifies bullish sentiment and price fluctuations through the following mechanisms:

1. High Leverage Chase and "Snowball" Effect

· Mechanism: Traders can open long contracts with leverage up to 20x or higher. This means small price increases can yield very high returns, attracting more capital and leverage influx.
· Amplification Effect: This buying pressure further pushes up spot and contract prices, forming a "price rise → more leveraged buying → continued price increase" positive feedback loop. An increase in open interest is often seen as a signal of new funds entering to go long.

2. Funding Rate Mechanism

· Mechanism: In perpetual contracts, when bullish sentiment dominates, the funding rate becomes positive, requiring longs to periodically pay shorts.
· Amplification Effect: High funding rates themselves become part of the narrative, advertised as proof of "strong demand for longs," attracting more speculators. Meanwhile, this makes shorting very costly, forcing hesitant shorts to close positions (buy to cover), adding more buy pressure in the market.

3. Short Liquidations Triggering "Chain Explosions"

· Mechanism: This is one of the most destructive amplification mechanisms in the contract market. When prices rise, those betting on decline face losses. Once the price hits their liquidation point, the system forcibly closes their positions (buying contracts to close shorts).
· Amplification Effect: Large-scale forced buying sharply pushes up prices, triggering more short liquidations and creating a chain reaction. This forced buy activity is completely independent of normal market demand and can generate vertical surges in a very short time.

4. Options Market Sentiment Guidance

· Mechanism: Derivatives signals are forward-looking. Data shows that during FOLKS’ price soaring, call options with strike prices between $8 and $12 account for a large proportion of open interest, reflecting market participants' expectation of continued rise.
· Amplification Effect: This optimistic options positioning can influence spot and futures traders’ psychology, reinforcing bullish consensus.

II. Risk Warning: The Other Side of High Volatility

You need to clearly recognize that all of the above mechanisms that amplify upward movement will similarly amplify downward movement during reversals.

· High Leverage as a Double-Edged Sword: Leverage magnifies profits but also equally magnifies losses. Small adverse fluctuations can rapidly deplete margin.
· Long-Short Reversal and Liquidation Risks: Once the upward momentum stalls, excessively high funding rates may cause longs to become overwhelmed and start closing positions, turning into selling pressure. If this triggers long liquidations (forced sales), the downward speed and severity can be as intense as the rise.
· Liquidity Risks: In extreme market conditions, order books may lack depth, leading to slippage and inability to execute liquidations at expected prices.

III. Advice for Ordinary Investors

In facing assets that are highly dependent on contract market sentiment fluctuations, you must stay absolutely clear-headed:

1. Distinguish Investment from Gambling: Recognize that participating in FOLKS contract trading is more about market sentiment and psychological game rather than pure fundamental analysis.
2. Use Leverage Cautiously: If you do participate, start with very low leverage (e.g., 2-5x) and set strict stop-losses.
3. Monitor Key Indicators: Always keep an eye on open interest, funding rates, and liquidation data in the contract market. When funding rates are abnormally high and open interest surges, it often indicates excessive market enthusiasm and high reversal risk.
4. Be Prepared to Zero Out: Never invest assets you cannot afford to lose entirely.

FOLKS’ recent rapid rise is a result of strong fundamental narratives combined with the built-in leverage and emotion-driven amplification mechanisms in the contract market. It showcases the efficiency of the DeFi market but also exposes its brutal side.