BTCUSD Liquidity Map

Crypto has seen a global explosion of unregulated exchanges offering a variety of derivatives products. This makes Crypto an almost unique market due to the risk brought with excessive leverage from these derivative products. In traditional markets, 250x even 100x leverage is seen as excessive and they are half as volatile as Crypto is! Thus, the degenerative leverage traders bring a new element to Crypto, as just a few of these traders being liquidated can cause a mass cascade of further liquidations. Enter Liquidity Maps:

Liquidity Maps are extremely useful for:

  • optimising stop-loss positioning…avoid where the crowd has set their stops!
  • setting profit targets for breakout trades.
  • using areas of large liquidity to enter positions of size to avoid unnecessary slippage.

The Liquidity Maps show the opaque areas of risk, where there is likely liquidation liquidity sitting. These liquidity pools are where the whales swim and we often see very quick price action in these highly liquid areas, resulting in the potential for significant losses for any traders who are not aware of them.

The Liquidity Map has both long and short predicted liquidation levels, at the key x3, x5 and x10 liquidation levels. Historically, when price has entered these levels we have seen an escalation in the move as positions are either liquidated or stops are triggered.

The areas with the tallest liquidity lines are price levels with significant liquidity, that typically the market will trend towards. It is important to note that each bar does not represent an exact number of liquidations, but is a count relative to the other liquidation levels. Therefore it shows how likely it is that the market will be affected by the liquidations and liquidity there. Price action will often tend to trend towards large areas of liquidity as this is where whales in the market are able to sufficiently fulfill their orders. Once a large liquidation level or cluster of levels has been cleared, this can often market a local top or bottom as whales have managed to fill their position and are ready to change the trend direction.