On-chain data shows the Bitcoin leverage ratio still has a very high value, a sign that has usually proven to be bearish for the crypto in recent months.<\/p>\n
Bitcoin Exchange Leverage Ratio Has Been Going Up In Recent Weeks<\/p>\n
As pointed out by an analyst in a CryptoQuant post, the BTC all exchanges leverage ratio is still quite high, suggesting that the crypto could still see further downtrend.<\/p>\n
The \u201cleverage ratio\u201d is an indicator that is defined as the ratio between the open interest and the all derivatives exchange reserve.<\/p>\n
Here, the \u201copen interest\u201d is a measure of the total amount of Bitcoin futures positions currently open in the derivatives market.<\/p>\n
And the \u201cderivatives exchange reserve\u201d is just the total number of coins currently stored in wallets of all derivatives exchanges.<\/p>\n
What the leverage ratio tells us is how much leverage users are taking on average in the BTC futures market right now.<\/p>\n
When the value of this indicator is high, it means users are taking a large amount of risk in the form of leverage at the moment. An excess of leverage usually leads to higher volatility in the market.<\/p>\n
Related Reading |\u00a0Bitcoin On-Chain Data: Miners Deposit Big To Derivatives Exchanges<\/p>\n
On the other hand, lower values of the ratio can result in lesser relative volatility in the crypto\u2019s price since users aren\u2019t taking much risk.<\/p>\n
Now, here is a chart that shows the trend in the Bitcoin all exchanges leverage ratio over the last year:<\/p>\n\n
The value of the metric seems to have been quite high in recent days | Source: CryptoQuant<\/p>\n
As you can see in the above graph, whenever the Bitcoin leverage ratio has hit a steep value during the last several months, both the indicator and the coin\u2019s price has subsequently plunged down.<\/p>\n
Mass leverage flushes like these are called \u201cliquidation squeezes.\u201d During such events, liquidations cascade together and amplify the price move that triggered the squeeze.<\/p>\n
Related Reading |\u00a0Why Bitcoin Is Undervalued According To This Expert\u2019s \u201cConservative\u201d Model<\/p>\n
Since the price moved in the same direction as the squeeze in these instances, they were all examples of a \u201clong squeeze.\u201d<\/p>\n
It looks like the ratio\u2019s value is once again high right now. If a similar trend as in the last few months follows this time as well, then a long squeeze may be coming\u00a0 soon and taking Bitcoin in for another plummet.<\/p>\n
BTC Price<\/p>\n
At the time of writing, Bitcoin\u2019s price floats around $20.5k, up 4% in the last week. Over the past month, the crypto has lost 30% in value.<\/p>\n\n
Looks like the value of the crypto has been going down over the last few days | Source: BTCUSD on TradingView
\nFeatured image from mana5280 on Unsplash.com, charts from TradingView.com, CryptoQuant.com<\/p>","protected":false},"excerpt":{"rendered":"
<\/p>\n
On-chain data shows the Bitcoin leverage ratio still has a very high value, a sign that has usually proven to be bearish for the crypto in recent months.<\/p>\n
Bitcoin Exchange Leverage Ratio Has Been Going Up In Recent Weeks<\/p>\n
As pointed out by an analyst in a CryptoQuant post, the BTC all exchanges leverage ratio is still quite high, suggesting that the crypto could still see further downtrend.<\/p>\n
The \u201cleverage ratio\u201d is an indicator that is defined as the ratio between the open interest and the all derivatives exchange reserve.<\/p>\n
Here, the \u201copen interest\u201d is a measure of the total amount of Bitcoin futures positions currently open in the derivatives market.<\/p>\n
And the \u201cderivatives exchange reserve\u201d is just the total number of coins currently stored in wallets of all derivatives exchanges.<\/p>\n
What the leverage ratio tells us is how much leverage users are taking on average in the BTC futures market right now.<\/p>\n
When the value of this indicator is high, it means users are taking a large amount of risk in the form of leverage at the moment. An excess of leverage usually leads to higher volatility in the market.<\/p>\n
Related Reading |\u00a0Bitcoin On-Chain Data: Miners Deposit Big To Derivatives Exchanges<\/p>\n
On the other hand, lower values of the ratio can result in lesser relative volatility in the crypto\u2019s price since users aren\u2019t taking much risk.<\/p>\n
Now, here is a chart that shows the trend in the Bitcoin all exchanges leverage ratio over the last year:<\/p>\n
The value of the metric seems to have been quite high in recent days | Source: CryptoQuant<\/p>\n
As you can see in the above graph, whenever the Bitcoin leverage ratio has hit a steep value during the last several months, both the indicator and the coin\u2019s price has subsequently plunged down.<\/p>\n
Mass leverage flushes like these are called \u201cliquidation squeezes.\u201d During such events, liquidations cascade together and amplify the price move that triggered the squeeze.<\/p>\n
Related Reading |\u00a0Why Bitcoin Is Undervalued According To This Expert\u2019s \u201cConservative\u201d Model<\/p>\n
Since the price moved in the same direction as the squeeze in these instances, they were all examples of a \u201clong squeeze.\u201d<\/p>\n
It looks like the ratio\u2019s value is once again high right now. If a similar trend as in the last few months follows this time as well, then a long squeeze may be coming\u00a0 soon and taking Bitcoin in for another plummet.<\/p>\n
BTC Price<\/p>\n
At the time of writing, Bitcoin\u2019s price floats around $20.5k, up 4% in the last week. Over the past month, the crypto has lost 30% in value.<\/p>\n
Looks like the value of the crypto has been going down over the last few days | Source: BTCUSD on TradingView
\nFeatured image from mana5280 on Unsplash.com, charts from TradingView.com, CryptoQuant.com<\/p>\n
<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"colormag_page_layout":"default_layout","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[82],"tags":[],"class_list":["post-3166","post","type-post","status-publish","format-standard","hentry","category-blockchain"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/posts\/3166","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/comments?post=3166"}],"version-history":[{"count":0,"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/posts\/3166\/revisions"}],"wp:attachment":[{"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/media?parent=3166"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/categories?post=3166"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/tags?post=3166"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}