On-chain data shows the Bitcoin futures market has remained heated recently as leverage taken on by investors has been quite high.<\/p>\n
Bitcoin Estimated Leverage Ratio Declines A Bit, But Still Remains Very High<\/p>\n
Following the rise in derivative activities, the leverage in the market hit a new all-tine high recently, as noted by an analyst in a CryptoQuant post<\/a>.<\/p>\n The \u201call exchanges estimated leverage ratio<\/a>\u201d is an indicator that\u2019s defined as the ratio between the open interest and the derivative exchange reserve.<\/p>\n When the value of this metric is high, it means the average investor is currently using a large amount of leverage on exchanges. Such a trend suggests holders are willing to take high risk currently.<\/p>\n On the other hand, low values of the indicator imply holders are going for a low-risk approach at the moment as they aren\u2019t using much leverage.<\/p>\n Now, here is a chart that shows the trend in the Bitcoin all exchanges estimated leverage ratio over the last couple of years:<\/p>\n\n The value of the metric seems to have rapidly risen during the last few weeks | Source: CryptoQuant<\/a><\/p>\n As you can see in the above graph, the Bitcoin estimated leverage ratio had been rising in recent weeks and hit a new all-time just a while ago.<\/p>\n However, since then the indicator\u2019s value has come down a bit. This decrease was instigated by the recent temporary rush of volatility in the market due to the CPI release<\/a>, which flushed out a large amount of leverage.<\/p>\n Nonetheless, the indicator\u2019s value has remained pretty high despite the decline, meaning there is still plenty of leverage to go around in the market.<\/p>\n Historically, overleveraged markets have usually ended in very sharp price moves as liquidations tend to occur quite easily in such environments.<\/p>\n Such liquidations amplify the price move that caused them, leading to even more liquidations. This event where liquidations cascade together is called a squeeze<\/a>.<\/p>\n Since leverage is so high in the Bitcoin futures market right now, a squeeze could likely take place and break BTC\u2019s price out of the range.<\/p>\n As for which direction the squeeze might go in, the quant comments: \u201cWith retail traders overly bullish compared to institutional traders, the risk-reward does not look good for the bulls.\u201d<\/p>\n BTC Price<\/p>\n At the time of writing, Bitcoin\u2019s price floats around $19.1k, down 2% in the last seven days.<\/p>\n\n Looks like the value of the crypto has once again gone stagnant after the CPI volatility | Source: BTCUSD on TradingView<\/a> <\/p>\n On-chain data shows the Bitcoin futures market has remained heated recently as leverage taken on by investors has been quite high.<\/p>\n Bitcoin Estimated Leverage Ratio Declines A Bit, But Still Remains Very High<\/p>\n Following the rise in derivative activities, the leverage in the market hit a new all-tine high recently, as noted by an analyst in a CryptoQuant post<\/a>.<\/p>\n The \u201call exchanges estimated leverage ratio<\/a>\u201d is an indicator that\u2019s defined as the ratio between the open interest and the derivative exchange reserve.<\/p>\n When the value of this metric is high, it means the average investor is currently using a large amount of leverage on exchanges. Such a trend suggests holders are willing to take high risk currently.<\/p>\n On the other hand, low values of the indicator imply holders are going for a low-risk approach at the moment as they aren\u2019t using much leverage.<\/p>\n Now, here is a chart that shows the trend in the Bitcoin all exchanges estimated leverage ratio over the last couple of years:<\/p>\n The value of the metric seems to have rapidly risen during the last few weeks | Source: CryptoQuant<\/a><\/p>\n As you can see in the above graph, the Bitcoin estimated leverage ratio had been rising in recent weeks and hit a new all-time just a while ago.<\/p>\n However, since then the indicator\u2019s value has come down a bit. This decrease was instigated by the recent temporary rush of volatility in the market due to the CPI release<\/a>, which flushed out a large amount of leverage.<\/p>\n Nonetheless, the indicator\u2019s value has remained pretty high despite the decline, meaning there is still plenty of leverage to go around in the market.<\/p>\n Historically, overleveraged markets have usually ended in very sharp price moves as liquidations tend to occur quite easily in such environments.<\/p>\n Such liquidations amplify the price move that caused them, leading to even more liquidations. This event where liquidations cascade together is called a squeeze<\/a>.<\/p>\n Since leverage is so high in the Bitcoin futures market right now, a squeeze could likely take place and break BTC\u2019s price out of the range.<\/p>\n As for which direction the squeeze might go in, the quant comments: \u201cWith retail traders overly bullish compared to institutional traders, the risk-reward does not look good for the bulls.\u201d<\/p>\n BTC Price<\/p>\n At the time of writing, Bitcoin\u2019s price floats around $19.1k, down 2% in the last seven days.<\/p>\n
\nFeatured image from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com<\/p>","protected":false},"excerpt":{"rendered":"