Crypto Analyst Warns Of Billions In Potential Losses From Centralized Liquidations

On May 17, a prominent crypto analyst, AltcoinGordon, issued a critical warning about the potential risks associated with centralized liquidation engines on major exchanges and derivatives platforms. According to AltcoinGordon, sudden liquidation events could result in the wiping out of billions in positions within minutes. He shared a heatmap illustrating clustered leveraged positions on Bitcoin (BTC) and Ethereum (ETH), highlighting that these clusters could be targeted for forced liquidation by large actors, or "whales." These whales could exploit shallow liquidity to trigger a domino effect, causing prices to crash in seconds.

AltcoinGordon emphasized that traders often overlook the centralization of liquidation engines, which are run on proprietary algorithms by centralized platforms. These engines operate without public transparency or external oversight, making them a hidden threat to the stability of BTC and ETH. When price volatility rises, exchanges liquidate positions to protect solvency and margin thresholds, but this process can accelerate downward price momentum through programmed selloffs. This phenomenon, known as "feedback liquidation," turns the liquidation engine into a volatility generator, creating structural fragility in both bull and bear cycles.

The analyst warned that smaller price moves could now trigger mass liquidations, especially at key resistance or support zones. For instance, BTC’s recent resistance at $66K had leverage-heavy open interest building up, and Ethereum’s long positions above $3,100 were also vulnerable to a similar cascade. AltcoinGordon advised traders to track liquidation levels using tools like HyblockCapital and CoinGlass, which reveal heat zones where forced liquidation chains are most likely to begin.

AltcoinGordon’s alert underscores the evolving complexity of the crypto market. As crypto derivatives grow, centralized derivatives platforms wield increasing influence on price flows. Unlike DeFi liquidations, which are smart contract-based and transparent, CeFi systems remain opaque. Retail traders are often unaware of the risks embedded in these centralized contracts. A small dip in price could liquidate highly leveraged positions across thousands of wallets, causing a loss that snowballs through the engine, auto-selling assets and pushing prices lower in seconds.

Experts have called for regulators and developers to demand real-time liquidation engine disclosures. In the meantime, AltcoinGordon advises traders to prioritize proactive hedging and stop-loss discipline to protect their capital. His final note was a stark reminder: “You’re not just trading crypto. You’re trading someone else’s risk model too.” This warning highlights the need for greater awareness and caution among traders in the face of these hidden threats to the stability of major cryptocurrencies.