Crypto Liquidation Heatmap Explained: How to Spot Squeeze Zones
Liquidation heatmaps reveal where leveraged traders will be forced to close. Learn to read these maps to anticipate squeezes, identify reversal zones, and understand why price moves to certain levels.
- Liquidation heatmaps show price levels where leveraged positions will be force-closed, creating predictable order flow.
- Price often gravitates toward dense liquidation clusters—these zones act as magnets before reversals.
- Use liquidation levels as potential targets and reversal zones, but always combine with other analysis.
How to Read a Liquidation Map
Here's an example of how liquidation data is typically displayed:
BTC/USDT Liquidation Map
Example visualizationHeavy short liquidations
Moderate shorts
Current price zone
Moderate longs
Heavy long liquidations
What this tells us:
More liquidation value sits below current price ($520M longs) than above ($450M shorts). This suggests slightly more downside risk if longs get swept. However, the heavy short liquidations at $72K could attract price upward first. Watch for a sweep of one level followed by a reversal toward the other.
What Is a Liquidation Heatmap?
A liquidation heatmap visualizes the price levels where leveraged positions would be forcibly closed by exchanges.
When traders use leverage, they borrow funds to increase position size. The exchange requires them to maintain minimum margin. If price moves against them enough to exhaust that margin, the exchange automatically closes (liquidates) their position to recover the borrowed funds.
Liquidation heatmaps aggregate this data across thousands of positions, showing:
- Long liquidation levels: Prices below current where long positions would be closed (shown in red/below price)
- Short liquidation levels: Prices above current where short positions would be closed (shown in green/above price)
- Density/intensity: The volume of liquidations at each level (brighter = more liquidations)
Why Liquidation Levels Matter for Trading
Liquidation levels create predictable order flow. Here's why this matters:
1. Liquidations Are Forced Orders
When a position is liquidated, the exchange executes a market order to close it. Long liquidations create sell orders. Short liquidations create buy orders. These aren't discretionary—they happen automatically at specific prices.
2. Liquidation Clusters Act as Magnets
Large liquidation clusters represent "free money" for market makers and whales. They know exactly where stop losses and liquidations are clustered. By pushing price to these levels, they trigger forced selling/buying that they can trade against.
3. Cascades Create Momentum
When price reaches a liquidation cluster, the forced orders push price further. This triggers more liquidations, creating a cascade. These cascades explain why crypto often moves 5-10% in minutes—it's a chain reaction of forced closing.
4. Post-Liquidation Reversals
After a major liquidation sweep, the selling/buying pressure exhausts. Price often reverses sharply because the forced orders are done and contrarians step in. This is why liquidation levels often mark local tops and bottoms.
How to Use Liquidation Data for Trading
Strategy 1: Liquidation Clusters as Targets
If you're long and see a dense short liquidation cluster above, price may gravitate toward it. Consider using that level as a take-profit target. The short squeeze will accelerate your trade.
Example: BTC at $68K. Heavy short liquidations clustered at $71-72K. You go long targeting $71K. Price rallies to $71.5K (short squeeze) then reverses. You captured the squeeze.
Strategy 2: Reversal Zones After Sweeps
After a major liquidation cluster is swept, look for reversal entries. The forced selling/buying is exhausted, and price often snaps back.
Example: Heavy long liquidations at $65K. Price dumps through $65K, liquidating millions. You wait for price to stabilize, then enter long at $64.5K. Price rebounds to $67K as selling exhausts.
Strategy 3: Stop Placement
Place stops beyond liquidation clusters, not at them. If your stop is at the same level as everyone else's liquidation, you'll get stopped out in the sweep.
Warning: The most obvious liquidation levels are also the most hunted. Don't place tight stops at these levels—give enough room to survive the sweep.
Strategy 4: Sentiment Gauge
The balance of long vs. short liquidations reveals positioning. If there's significantly more long liquidation value below price than short liquidation value above, the market is net long (more downside risk). Vice versa for net short.
Liquidation Scenarios Decoded
| Long Squeeze | Short Squeeze | Cascade Event | |
|---|---|---|---|
| Trigger | Price drops through long liquidation cluster | Price rises through short liquidation cluster | Initial liquidations trigger chain reaction |
| Forced orders | Sell orders (longs closing) | Buy orders (shorts closing) | Massive one-sided flow |
| Price action | Accelerated drop | Accelerated rally | Violent move (5-10%+ in minutes) |
| What to watch for | Reversal after sweep | Reversal after squeeze | Exhaustion + reversal |
| Best response | Wait for stabilization, then long | Wait for exhaustion, then short | Don't fight it—wait for the dust to settle |
Common Liquidation Patterns
Stop Hunt → Reversal
Price dips just below a key level to trigger long liquidations, then immediately reverses upward. Classic manipulation pattern—the sweep creates liquidity for big buyers.
Fake Breakout
Price breaks above resistance, triggering short liquidations and FOMO longs, then reverses hard. The "breakout" was just a liquidation grab.
Cascade Flush
Massive liquidation cascade wipes out one side of the market in minutes. Price then stabilizes and often trends in the opposite direction.
Magnet Effect
Price slowly grinds toward a large liquidation cluster over hours/days. The cluster acts as a magnet until it's finally swept.
Limitations of Liquidation Data
Liquidation heatmaps are useful but not perfect. Keep these limitations in mind:
- Data isn't complete: Not all exchanges share data. OKX, some offshore exchanges, and private OTC desks aren't included.
- Positions change: Traders can add margin, adjust leverage, or close positions—changing liquidation levels in real-time.
- Estimated, not exact: Heatmaps estimate liquidation levels based on available data. Actual liquidations may differ.
- Everyone sees the same data: If liquidation levels are obvious, they're more likely to be hunted. This can become self-defeating.
- Context matters: A liquidation cluster during a strong trend may not reverse price—it just accelerates the move.
Best Practices
- Combine with other analysis: Use liquidation data alongside price action, volume, and funding rates—not in isolation.
- Watch for extremes: Small liquidation clusters don't matter much. Focus on unusually large clusters.
- Consider the trend: Liquidation sweeps in the direction of the trend often continue. Counter-trend sweeps are more likely to reverse.
- Don't front-run too early: Wait for price to actually reach the liquidation zone. Anticipating too early gets you chopped up.
- Manage risk: Even if you're right about a reversal zone, price can overshoot. Use stop losses.
Frequently Asked Questions
What is a crypto liquidation heatmap?
A liquidation heatmap is a visual representation showing where leveraged positions would be forcibly closed (liquidated) at different price levels. Dense clusters indicate price zones where many positions would be liquidated, making these areas potential targets for price moves.
How do liquidation heatmaps work?
Heatmaps aggregate data from exchanges showing the estimated liquidation prices of open positions. They calculate where positions would be liquidated based on entry prices, leverage used, and margin requirements. Brighter/denser areas indicate more liquidations at that price level.
Why do prices often move toward liquidation clusters?
Large liquidation clusters represent "free money" for market makers. When price reaches a liquidation zone, forced selling (long liquidations) or forced buying (short liquidations) creates predictable order flow. Smart money often pushes price to trigger these liquidations before reversing.
What is a liquidation cascade?
A liquidation cascade occurs when liquidations trigger more liquidations in a chain reaction. When leveraged positions are liquidated, the forced orders push price further, triggering more liquidations. This creates rapid, violent price moves that can move markets 5-10% in minutes.
How do I use liquidation levels for trading?
Use liquidation clusters as potential reversal zones. Price often reverses after sweeping a major liquidation level. Also use them as targets—if you're long and there's a large short liquidation cluster above, price may gravitate toward it. Always combine with other analysis.
Where can I find crypto liquidation heatmaps?
Popular sources include Coinglass, Hyblock Capital, and Kingfisher. Most show data for major exchanges like Binance and Bybit. Thrive.fi monitors liquidation events in real-time and alerts you when significant liquidations occur.
What causes large liquidation events?
Large liquidation events typically occur when: (1) price breaks through a key support/resistance level where many stops are clustered, (2) unexpected news causes rapid price movement, (3) funding rates are extreme and the crowded side gets squeezed, or (4) cascading liquidations create a chain reaction.
Are liquidation heatmaps accurate?
Heatmaps show estimated liquidation levels based on available data. They're not 100% accurate because: some exchanges don't share data, traders can adjust positions, and not all leverage levels are known. Use them as a guide, not gospel.