July 2026

The number is -9.96% net. It was not produced by a regime the system failed to read, or by a broad deterioration in the book. 217 of the month's 218 closed trades behaved normally and returned +$1,567.61 between them. One position lost $7,554.69.

This letter is mostly about that one position.

01 / Performance

The strategy returned -9.96% net across 25 active trading days. 23 of those days closed positive.

On June 30 at 16:45 UTC the system opened a long in INUSDT. It closed on July 2 at 10:52, one day and eighteen hours later, at an average exit price 55.75% below the average entry. The realized loss was $7,554.69, or 11.03% of account equity in a single trade. Maximum adverse excursion during the hold reached -74.6%. The position never traded favorably at any point after entry.

Everything else in July was ordinary. Excluding that position, the remaining 217 closed trades produced +$1,567.61 across 34 symbols with two small losses, and would have made July a positive month of roughly +2.6%. I mention that arithmetic not to discount the loss but to locate it: this was a single-position event, not a strategy-wide one.

All returns are reported net of commissions and funding costs.

02 / Risk & Execution

Maximum drawdown was 12.41%, recorded on July 2. That is now the strategy's largest realized drawdown since inception, and it replaces the -7.8% figure previously carried across our materials. Every document has been updated.

I want to describe the failure precisely rather than generally.

The strategy builds positions in layers, improving cost basis as a dislocation deepens. That mechanism assumes the instrument is dislocated and will revert. It does not distinguish between a price falling because leveraged holders are being forced out, which is the condition we trade, and a price falling because the asset itself is being repriced permanently. In the second case, every additional layer buys more of something on its way to a materially lower level, and the averaging that normally protects the position instead enlarges it.

That is what happened here. The layered entry process worked exactly as designed and made the outcome worse.

Two further points I will not soften. First, the position was held for forty-two hours, against a median hold of eighteen seconds. Our stated circuit-breaker logic disarms the system when realized volatility exceeds pre-set levels; it did not disarm this position, and I have changed how we describe that control because the previous description promised more than the system delivered. Second, the loss crossed a month boundary. The position opened on the final afternoon of June and closed on July 2, so June's reported +7.22% was accurate on a realized basis while the book already carried this position deeply underwater. We report on realized results and have applied that convention consistently, but June's letter reported a 0.55% maximum drawdown without disclosing an open position in that state, and a note has been added to it.

03 / Market Structure

The market context matters less this month than the position does, but it should be recorded.

July was quiet. The late-June liquidation cascade had already cleared leverage out of the system, and average daily liquidations across crypto derivatives ran well below the $400 million to $500 million range typical for the year. Bitcoin recovered roughly 6% off its early-July low to finish near $63,900, and the CoinDesk 20 posted its largest monthly advance in a year, but the advance came on thin participation rather than forced transacting. US spot Bitcoin ETFs drew approximately $205 million in net inflows, the smallest monthly total since the products launched.

Genuine forced-flow opportunity was scarce, which is why activity outside the INUSDT position fell to roughly 40% of June's trade count. In a month with little to trade, a single bad position is not diluted by anything.

04 / Looking Ahead

The work now is on instrument selection rather than on entry timing or sizing. The system needs to distinguish a dislocation from a repricing before it commits the first layer, and it needs a hard stop on total position loss that does not depend on a volatility trigger firing. Both are being addressed.

I would rather report this month plainly than frame it. Nineteen months of results now include one that lost close to ten percent, the maximum drawdown across the record is 12.41% rather than 7.8%, and both figures are what an allocator should underwrite against.

The strategy's other parameters held. That is worth something, but it is not the point of this letter.