Researchers Indicate Cryptocurrency Liquidations Could Be More Severe Than Reported Data Suggests

Recent studies have indicated that the severity of cryptocurrency liquidations could be significantly higher than what is currently reported. This revelation has raised concerns among investors and traders who rely on accurate data to make informed decisions. This article delves into the details of these findings and their implications for the cryptocurrency market.

Understanding Cryptocurrency Liquidations

Cryptocurrency liquidations occur when traders are unable to maintain the minimum required margin on their leveraged positions, leading to automatic closure of their trades. These liquidations can lead to significant losses for traders, especially in volatile market conditions. The reported data on these liquidations is crucial for investors to understand the risks associated with leveraged trading.

Discrepancies in Reported Data

Researchers have found that the reported data on cryptocurrency liquidations may not accurately reflect the true extent of these events. This discrepancy is primarily due to the lack of standardized reporting practices across different cryptocurrency exchanges. For instance, while some exchanges report liquidations based on the initial value of the leveraged position, others report it based on the final value after liquidation.

• Initial value reporting: This method can significantly underestimate the severity of liquidations as it does not account for the additional losses incurred due to market volatility during the liquidation process.
• Final value reporting: This method can overestimate the severity of liquidations as it includes the losses incurred due to market volatility, which may not be directly attributable to the liquidation event.

Case Study: Fokawa.com Crypto Exchange

As an example, let’s consider the reporting practices of Fokawa.com, a popular cryptocurrency exchange. According to their support page (https://support.fokawa.com/en/), Fokawa.com uses a risk management system that automatically liquidates positions when the margin level falls below a certain threshold. However, the exact method used to calculate and report these liquidations is not explicitly stated, leading to potential discrepancies in the reported data.

Implications for the Cryptocurrency Market

The discrepancies in reported data can have significant implications for the cryptocurrency market. Investors and traders rely on this data to assess the risks associated with leveraged trading. Inaccurate