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Recent findings suggest that the crypto market liquidation data could be far greater than what major exchanges have been reporting, potentially leaving traders in the dark about the true extent of market risk.
Altered Liquidation Reports by Exchanges
According to Vetle Lunde, a senior analyst at K33 Research, leading cryptocurrency exchanges like Binance have significantly altered their reporting practices since 2021, leading to a dramatic underrepresentation of actual liquidation volumes. Lunde revealed that these exchanges had shifted from recording all liquidations to reporting just one liquidation per second, irrespective of the actual number occurring within that time frame.
“Liquidation data from exchanges are bogus and a vast underrepresentation of actual liquidation volumes in the market,” Lunde stated, pointing out that this underreporting has been a persistent issue for the past three years.
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What is Liquidation Data?
This revelation is particularly concerning because liquidation data is a critical tool for traders and analysts to gauge market risk and understand leverage ratios on exchanges.
Liquidations occur when traders’ positions are forcefully closed due to a significant loss in value, often during periods of high volatility. Accurate reporting of these events is essential for a clear picture of market dynamics, especially for those looking to assess the potential for future volatility.
PR Reasons
Lunde’s research also highlighted that open interest—a measure of the value of outstanding crypto derivatives—does not always correlate with liquidation data. This discrepancy suggests that the market may not be getting a full understanding of how leverage is being used and how it impacts market movements.
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According to Lunde, exchanges may be limiting this data to maintain an informational advantage or for public relations reasons, particularly as some exchanges have ties to investment firms that could benefit from having access to more accurate data than the broader market.
Implications
The implications of these findings are significant. If traders are operating based on incomplete or inaccurate data, their ability to manage risk and make informed decisions is severely compromised.
Lunde went so far as to describe current liquidation data as “mostly erroneous entertainment and not actionable,” a stark warning to those who rely on these metrics for trading strategies.
As of the time of writing, crypto derivative data platform Coinglass reported that over the past 24 hours, 56,958 traders had been liquidated, with total liquidations amounting to $156.7 million—83% of which were long positions. However, this data is derived from the same major exchanges that Lunde criticized.
