Hyperliquid Founder Demands Transparency as CEXs Hide Liquidation Data – Crypto Economy

Centralized exchanges are under renewed scrutiny after Hyperliquid co-founder Jeff Yan warned that liquidation data may be significantly underreported during periods of extreme volatility. In remarks shared on social platforms, Yan highlighted a critical gap between what exchanges disclose and what actually occurs in fast-moving markets, arguing that the true scale of liquidations could be far higher than publicly visible figures suggest.

Underreported Liquidations: A Structural Problem

Yan pointed to documentation from a major exchange indicating it only publishes one liquidation order per second, even if many liquidations occur within that same second. Because liquidations often happen in rapid bursts when prices swing sharply, this throttle could mask a large number of events. In extreme conditions, the undercount could be as high as 100 times, creating a distorted picture of market stress and trader risk.

In practical terms, this means what appears to be a manageable trickle of liquidations may actually be a flood. Aggregators and analytics platforms that rely on these rate-limited feeds would then reflect an incomplete view, potentially misleading traders, risk desks, and analysts who depend on timely, accurate liquidation signals.

Volatility Surge Exposes Reporting Gaps

The warning arrived on the heels of a dramatic market swing. On Friday, Bitcoin briefly fell below $105,000 before rebounding to $115,353 by early Monday, a move that left a trail of forced liquidations. According to widely cited derivatives data, more than 1.6 million traders were liquidated that day, with total liquidations reaching an estimated $19.1 billion—a record figure that underscores the intensity of the downturn.

Even those headline numbers may be understated if key venues are only reporting a fraction of actual liquidation events. Industry data providers have acknowledged the possibility that the true totals could be higher, given the one-per-second reporting constraint at certain exchanges.

Why Accurate Liquidation Data Matters

• Risk management: Lenders, market makers, and leveraged traders rely on real-time liquidation signals to adjust exposure. Underreporting can delay risk responses and worsen cascading sell-offs.
• Price discovery: Forced selling and buying shape intraday price dynamics. Incomplete data obscures how much of a move is flow-driven versus fundamental.
• Market stability: Transparent liquidation metrics help identify stress before it becomes systemic. Poor visibility erodes confidence when volatility rises.
• Fairness and trust: Investors expect exchanges to present an accurate account of market conditions. Perceived opacity can push capital toward venues with stronger transparency.

What Exchanges Could Improve

• Finer-grained reporting: Publish all liquidation events with millisecond timestamps instead of aggregating to one per second.
• Dedicated feeds: Offer separate, high-throughput liquidation streams that include size, side, instrument, and whether an event is partial or full.
• Standardized metrics: Adopt consistent definitions across venues for “liquidation,” “auto-deleveraging,” and “margin call” events.
• Auditability: Provide periodic third-party attestations and public methodology notes so data users can validate completeness.
• Historical accuracy: Release backfilled, lossless liquidation datasets for forensic analysis after volatile periods.

How Traders and Analysts Can Adapt

• Use multiple sources: Cross-check liquidation prints against open interest changes, funding rates, and order book imbalance rather than trusting a single feed.
• Monitor microstructure: Watch for sudden spread widening, inventory shifts by top market makers, and abnormal slippage—often better stress indicators than headline liquidation counters.
• Adjust leverage: In periods of reported-data uncertainty, lower leverage, widen stops, or size positions assuming the true liquidation pace may be faster than displayed.
• Scenario testing: Backtest strategies under assumptions of delayed or partial liquidation reporting to understand worst-case execution risks.

The Bigger Picture

Crypto markets have matured in many respects, but transparency around liquidations remains a weak spot. If exchanges limit liquidation reporting during the very moments when clarity is most needed, market participants are left to trade blind. The recent volatility spike underscores the urgency for better standards and richer datasets.

Yan’s call for transparency has intensified broader industry demands for improved market data. Whether through enhanced APIs, standardized reporting, or independent audits, exchanges that address these gaps will likely gain credibility and liquidity over time. Until then, traders should assume that liquidation tallies during fast moves might be incomplete—and manage risk accordingly.