In a recent statement, Bybit CEO Ben Zhou raised eyebrows by contesting the widely accepted figures surrounding crypto market liquidations, which were reported to be around $2 billion. Zhou’s assertion that the true figure may actually fall between $8 billion and $10 billion has ignited discussions about the integrity of liquidation data in the cryptocurrency sector. This discrepancy is critical, as it highlights not only potential misinformation but also a broader issue within the industry regarding the transparency and accuracy of reported figures.
Zhou specifically pointed to internal data from Bybit, indicating that the exchange alone accounted for a staggering $2.1 billion in liquidations within just a 24-hour period. This number starkly contrasts with the $333 million reported by Coinglass, creating a significant gap that raises questions about the reliability of data streaming from various exchanges. The lack of coherence in these reports suggests that many platforms may be underreporting their liquidation figures, intentionally or otherwise.
The discussion of transparency doesn’t stop there. Zhou acknowledged that exchanges, including Bybit, have imposed restrictions on the frequency with which data is updated, particularly via their APIs. This limitation can skew public perception and plays a role in the ongoing challenge of establishing trustworthiness in these platforms. Zhou has made a commitment to improve transparency, promising that Bybit will publish more comprehensive liquidation records going forward.
Supporting Zhou’s concerns, Vetle Lunde, head of research at K33 Research, pointed out that the reliability of liquidation data has been in decline since mid-2021. He noted that many significant exchanges restrict their WebSocket API updates to just one report per second. This limitation on data availability significantly underestimates the actual market activities involving liquidations.
The implications of liquidation events are profound, particularly considering the crypto market’s inherent volatility. Traders often face situations where they can no longer sustain leveraged positions due to insufficient funds, leading to liquidations. Recent data suggests that the scale of liquidations experienced in today’s market rivals some of the most catastrophic events in recent history, such as the collapses related to Terra/Luna and FTX.
Accurate liquidation data serves as a crucial indicator of market sentiment, leverage exposure, and evolving risk trends. On the contrary, the tendency for some exchanges to downplay liquidation statistics can undermine market stability, as it cultivates a false sense of security among investors. Lunde warns that exposing the full extent of liquidation events could dissuade users from trading, while selective reporting gives exchanges a strategic edge.
Additionally, the intertwining of exchanges with investment firms can lead to conflicts of interest, as selective data benefits certain stakeholders. This situation calls for a reevaluation of how liquidity and trading data are reported across platforms.
As discussions around the true scale of liquidations and the reliability of market data intensify, the industry must prioritize transparency to foster trust among users. Increased awareness and reform in reporting practices could help mitigate misinformation and enhance the overall stability of the cryptocurrency market.