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Senior analyst Vetle Lunde of K33 Research believes that major exchanges may understate the degree of Bitcoin market liquidations significantly. Lunde exposed in an August 29 paper that some bitcoin exchanges like Binance, Bybit, and OKX had changed their liquidation data reporting since 2021, therefore maybe underrepresenting real liquidation volumes in the market.
Lunde pointed out that these interactions now capture one liquidation per second rather than monitoring all liquidations, thus distorts the picture of the real market risk levels. Underlining that this issue has persisted for the previous three years, Lunde said: “Liquidation data from exchanges are bogus and a vast underrepresentation of actual liquidation volumes in the market.”
Analyzers and traders depend on liquidation data as they help them to grasp leverage ratios and market risk tolerance. Understanding the effect of unanticipated volatility and deciding if significant market occurrences, like Crypto Black Monday on August 5, when Bitcoin dropped rapidly below $50,000, completely eliminate leverage depend on accurate data.
According to the report, exchanges may be keeping an informational advantage for their own trading requirements or suppressing data for public relations reasons. Lunde claimed some exchanges even own investment firms with trading based on knowledge not known by the rest of the market.
While it may help some comprehend leverage flush-outs, tracking changes in open interest—a indication of the value of crypto futures yet to expire—may not fully represent the mechanics of the market during liquidation events.
Coinglass, a crypto derivatives analytics platform, shows that, at the time of writing, 83% of 56,958 traders liquidated during the preceding 24 hours equivalent to $156.7 million. Lunde, on the other hand, notes that this data also originates from the same interactions probably underreporting liquidation totals.
“For now, liquidation data are mostly erroneous entertainment and not actionable,” Lunde remarked. Lunde advised traders handling the erratic crypto markets to handle revealed data cautiously.
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