Glossary Liquidation Sensitivity Index (LSI)

The Liquidation Sensitivity Index is a financial metric devised by CryptoSlate used to gauge the market’s reaction to price movements in the crypto markets, particularly Bitcoin. It is calculated by dividing the total value of both long and short liquidations by the absolute value of the percentage change in Bitcoin’s price. The LSI provides insight into the market’s sensitivity; a higher LSI suggests that smaller price fluctuations result in more significant liquidations. This index is particularly useful in understanding the dynamics of crypto-native markets and derivatives trading.