How Does the "Tail Wagging the Dog" Analogy Apply to Futures and Spot Markets? ▴ Learn

How Does the “Tail Wagging the Dog” Analogy Apply to Futures and Spot Markets?

This analogy suggests that the smaller, often more leveraged and forward-looking futures market (the "tail") can disproportionately influence the price of the larger underlying spot market (the "dog"). In crypto, large futures liquidations or significant contract rolls can trigger spot market moves, leading some to believe the derivatives market is driving the spot price action.

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