Coinkarma founder Benson Sun says liquidation heatmaps are overrated

Coinkarma founder Benson Sun said liquidation heatmaps are being given too much weight in trading analysis, arguing that their usefulness is often overstated. According to him, the dense zones shown on these charts are generally inferred from historical trading data and assumed leverage levels, rather than reflecting the exact number of positions still waiting to be liquidated in the market. Sun said those estimated liquidation areas can shift as traders add or reduce positions, post more margin, or see their average entry cost change. Because of that, the longer the time frame, the larger the potential deviation between the chart and actual market positioning. In his view, liquidation heatmaps are better used as a short-term reference for market structure over the past 24 hours to three days. He added that they should not take up an outsized role in a trading system.