The post Crypto Liquidation Data FAKED: Here’s How Traders Are Being Misled appeared first on Coinpedia Fintech News
The crypto markets, led by Bitcoin (BTC), experienced a massive downturn in the past 24 hours.
The market cap, which had been hovering near $2.11 trillion, plummeted by nearly 3%, sending shockwaves through the crypto community. Bitcoin, the king of cryptocurrencies, also took a hit, dropping below the crucial $58k-$60k support level and settling at around $57,343. As you would expect, this volatility triggered liquidations, with over $161 million worth of leveraged positions being wiped out.
Long traders, who had been riding the wave of bullish sentiment, were particularly hard hit. But this isn’t the whole story.
Research from K33, led by Vetle Lunde, indicates that major exchanges like Binance, Bybit, and OKX have changed how they report liquidations since 2021. This adjustment has led to underreporting of actual liquidation volumes, raising concerns about data accuracy and reliability.
What’s going on?
Wrong Data = Chaos?
Lunde’s research suggests that the actual number of liquidations is higher than what current data shows. Exchange liquidation data is traditionally used to assess market risk and leverage levels. However, if this data is incorrect, traders might be making decisions based on a distorted view of market conditions, which could lead to poor risk management and a flawed understanding of market volatility.
Exchanges used to report every individual liquidation, providing a full picture of market activity. Now, they report only a portion of these events, resulting in data showing just one liquidation per second instead of the true frequency. This reduction creates a misleading view of the market.
Data Manipulation to Blame?
Lunde speculates that exchanges might be altering data for strategic reasons. They may want to protect their public image or maintain a competitive edge. By limiting the data they release, exchanges could be preserving valuable information for themselves or their affiliated investment firms.
Market Impact Analysis
Liquidation data is crucial for traders and analysts to understand leverage and the impact of sudden market moves. For example, during major events like Crypto Black Monday on August 5, when Bitcoin briefly fell below $50,000, accurate data on liquidations could help gauge how leverage was handled during the downturn.
If the reported data is flawed, traders may not fully understand the level of leverage and risk in the market, which can lead to poor decision-making. While tracking open interest—a measure of outstanding crypto derivatives—can provide some insights, it may not fully capture the dynamics of leverage or new positions opened during volatile times.
Community Concerns Rise
Despite these concerns, recent data from Coinglass shows that 56,958 traders were liquidated in the past 24 hours, totaling $156.7 million in liquidations, mostly from long positions. However, doubts about data accuracy remain, since these figures come from major exchanges that might not fully represent the market’s true condition.
Could these changes in reporting negatively impact crypto traders and the broader market? If exchanges continue to underreport data, it could obscure the real risks and volatility, leaving traders with an incomplete understanding of the market dynamics they rely on for making informed decisions.