<b>The Economic Bomb: A Strategic Financial Warfare Tactic</b>

Financial warfare has surpassed traditional tactics such as currency devaluation, economic sanctions, and national debt manipulation, now increasingly driven by decentralized finance (DeFi), algorithmic distortions, and institutional liquidity control. This dissertation introduces the <i>Economic Bomb</i>, a systemic financial attack model leveraging liquidity fragility, leverage-induced liquidation cascades, and algorithmic volatility shocks to destabilize financial markets. Unlike many conventional speculative attacks, it can function without direct state intervention, relying on short-selling concentration, ETF-driven liquidity shocks, and digital asset custody centralization to erode financial stability. By situating the <i>Economic Bomb</i> within classical financial warfare theories, this study extends Krugman’s speculative attack models, Minsky’s financial instability hypothesis, and Griffin &amp; Shams’ market manipulation research while integrating hybrid economic warfare frameworks to examine geopolitical risks in digital asset markets.A key contribution is the Decker Sentiment Short Interest Model (DSSIM)—a quantitative framework for detecting systemic financial attacks. Unlike traditional short interest indicators, DSSIM integrates sentiment-weighted liquidity withdrawals, leverage-induced liquidation clustering, and institutional positioning asymmetries to identify pre-crash market distortions. Validated through GARCH modeling, Monte Carlo simulations, and machine-learning-driven anomaly detection, DSSIM identifies <i>Economic Bomb</i> patterns before systemic collapses. Empirical studies on Black Wednesday (1992), the Asian Financial Crisis (1997), the 2008 Global Financial Crisis, and Bitcoin crashes (2021–2023) reveal a strong correlation between <i>Economic Bomb</i> strategies and decentralized asset manipulation. Findings indicate that Bitcoin and DeFi markets exhibit heightened vulnerability due to fragmented liquidity, algorithmic trading risks, and the increasing influence of ETF-driven institutional positioning, which may exacerbate systemic risks. Additionally, state-sponsored mining pools and regulatory-driven exchange controls raise concerns over nation-state financial warfare targeting economies that have integrated decentralized digital assets.To mitigate these risks, this dissertation proposes decentralized liquidity protections, algorithmic circuit breakers, forensic market surveillance, and strategic policy interventions. DSSIM serves as a critical early-warning tool for regulators, risk managers, and policymakers, offering empirical validation for systemic risk mitigation models. As decentralized assets become further integrated with the traditional finance market, contagion risks grow, necessitating coordinated regulatory oversight, institutional risk controls, and decentralized security measures to safeguard financial stability.*The original thesis was submitted on February 17, 2025, and this revised version has been submitted, leaving all data intact from the original submission, with additional clarification steps for reproducibility within the thesis itself.