Crypto liquidations may be worse than data suggests, researchers suggest.
The volume and volume of crypto market liquidity may be worse than data from major exchanges, a researcher has revealed.
In the year On August 29, K33 Research senior analyst Vettel Lunde said major crypto exchanges such as Binance, Bybit and OKX have significantly changed their liquidity data reporting from 2021.
These changes meant that exchanges recorded one liquidation per second instead of reporting all liquidations.
“Liquidity data from exchanges is false and underestimates the actual amount of liquidity in the market,” he said.
“Liquidity Data Underreported in Last 3 Years.”
If true, that means crypto traders may be mainly acting on the murky picture of the market.
Liquidity data is commonly used as a “clean way to measure risk appetite” and better understand the leverage ratio on exchanges.
According to the research, open interest, a measure of the price of crypto derivatives yet to expire, does not always correlate with liquidity data, as shown in the chart below.
Changes in OI vs Fluid. Source: K33 Research
In addition, liquidity data can also be used to better understand the impact of sudden volatility and is used to better understand whether or not Bitcoin was released during large liquidity events such as Crypto Black Monday on August 5th when the price of Bitcoin briefly dipped below $50,000.
The researcher hypothesizes that exchanges may limit information for PR considerations or to secure the use of information for their own benefit:
“Some exchanges are even interested in investment companies that can trade on information that the market doesn't have.”
Tracking changes in open interest can help measure outflows because it can compare past consumption events with the current one, “but cannot account for traders opening new positions in the middle of a selloff,” he said.
“For now, screening data is largely a misguided recreation and not actionable.”
Cointelegraph reached out to the exchanges mentioned in the study but did not receive a comment at the time of publication. This article will be updated if you reply.
Related: Bitcoin traders expect $62K as 3% BTC price gains eat up liquidity
At the time of writing, crypto derivative data analysis platform Coinglass reported that 56,958 traders had liquidated a total of $156.7 million in the last 24 hours, of which 83 percent were long positions.
However, that data is derived from the data streams of major exchanges.
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