How to understand the liquidation map
The liquidation map or blowup map (aka liq map) provides a visualization of the liquidations of traders in the futures crypto market. It only shows the liquidations that are predicted to take place based on previous price movements.
Traders are exposed to an additional risk at all times when trading on unregulated cryptocurrency derivatives exchanges, namely the risk of liquidation (blowup). When the liquidation price of a trader's position is triggered, his position will be forcibly closed by the exchange's risk engine.
When a small number of positions are liquidated, the impact on the market is small, but if thousands of positions have their liquidation prices close to each other, the impact of these orders on market prices if they are liquidated is huge. More importantly, the market buying and selling caused by the liquidation of certain positions will drive the price quickly, causing more nearby positions to be liquidated, forming a terrible "chain reaction" and causing large price fluctuations (this is also the entry method that institutions like to use, because the release of huge liquidity in a short period of time can meet the entry needs of large institutional orders).
Different combinations of leverage and time frames depict several liquidation clusters. The denser and taller the liquidation cluster, the greater the impact on price action when it arrives.
