In the cryptocurrency space, data transparency is crucial, especially when it comes to the liquidation activities of exchanges. However, a senior researcher from K33 Research recently raised an interesting point on the social media platform X:
“The cryptocurrency liquidation volumes reported by the exchanges we rely on may be significantly lower than what actually occurs. This finding, if true, could have significant implications for the way we understand market dynamics and assess trading risk.”
Related to API data retrieval from exchanges
In the world of cryptocurrency, liquidation data is a key metric used by investors to measure market risk and make trading decisions. However, Vetle Lunde, a senior researcher at K33 Research, published a series of posts on the social media platform X, pointing out that the liquidation data we rely on may not be as reliable as we think.
Lunde suggested that some top digital asset exchanges, including Binance, Bybit, and OKX, may have made adjustments to their liquidation WebSocket APIs in 2021, causing them to push liquidation information only once a second instead of reporting all liquidation activity in real time.
The change, purportedly intended to provide a fairer trading environment and optimize user data flow, has the result that cryptocurrency liquidation data reported by exchanges may have been significantly underestimated over the past three years.
The impact of the possibility that liquidation data is underestimated
If Lunde’s analysis is correct, it would mean that the liquidation data we are currently seeing does not truly reflect the market’s liquidation volume.
This is not only a problem for traders, as it can affect their assessment of market risk, but also for investors who rely on this data to understand exchange leverage and market risk appetite.
Accurate liquidation data can help traders and investors more fully understand the impact of market volatility on open positions and whether unhealthy leveraged trading in the market is being cleaned up when large-scale liquidation events occur.
Lunde further suspects that exchanges limiting transparency of clearing data may be a strategic public relations choice. By doing so, exchanges may be withholding information that is significant to the overall risk profile of the market, thereby gaining an information advantage over other market participants.
Therefore, some exchanges may even take advantage of this information and work with investment firms to conduct trades that may be based on information that is unknown to other market participants.
To more reliably measure liquidation volume, Lunde recommends monitoring the change in notional open interest versus the previous day’s open interest. While this approach is helpful for comparing past leverage events with current events, it does not take into account new positions that traders may have opened during a market sell-off.
For investors who are not familiar with the derivatives market, open interest refers to the total number of derivative contracts, such as futures or options, that have not yet been settled. The changes in these contracts can provide us with clues to market activity and potential risks.
Why is clearing data so important?
While there are doubts about the authenticity of the liquidation data released by top cryptocurrency exchanges, it is crucial to understand the meaning behind the data. Because liquidation data not only reveals market sentiment and trends to traders, but it is particularly useful during extreme market conditions.
Take the market crash caused by COVID-19 in March 2020 as an example. The price of Bitcoin fell below $4,000 at one point, resulting in the rapid liquidation of $750 million worth of Bitcoin in a short period of time.
In this case, liquidation data helps traders gain timely insights into market dynamics, effectively manage risks, and reduce potential losses or maximize profits by adjusting their position strategies.
In addition, the prevalence of high-leverage trading in the cryptocurrency market further highlights the importance of liquidation data, as liquidation data can provide traders with early warning of the possibility of margin calls, which is particularly critical in highly volatile markets.
A margin call can trigger a chain of liquidations, which can have a significant impact on the price of the underlying asset. Therefore, accurate clearing data is critical for assessing market stability, predicting potential price fluctuations, and developing appropriate risk management strategies.
Conclusion:
Vetle Lunde revealed that the liquidation data of cryptocurrency exchanges may be underestimated, which not only challenges the understanding of market dynamics, but also questions the responsibility and integrity of exchanges. If the liquidation data is indeed inaccurate, it may conceal the real risks of the market and mislead investors and traders. Therefore, as the core of the market, exchanges have the responsibility to ensure the accuracy of data to safeguard the interests of users and the industry.
Liquidation data is an important indicator of market sentiment and trends, and a key tool for risk management. It is essential for predicting and preparing for market volatility, especially in the context of the prevalence of high-leverage trading. This may involve improving API reporting mechanisms, strengthening communication with investors, and establishing a more rigorous data verification process. As the regulatory environment improves, we look forward to a more mature and reliable data indicator for the cryptocurrency market.
#加密货币市场 #交易所清算数据 #数据透明度 #未平仓合约
