On-chain information reveals the Bitcoin leverage ratio has continued to remain at excessive values regardless of the current decline within the crypto’s worth.
Bitcoin Leverage Ratio Hasn’t Budged A lot In Response To Value Plunge
As identified by an analyst in a CryptoQuant submit, the BTC leverage ratio has remained at excessive values not too long ago, regardless of the worth declining to $41k.
The “estimated leverage ratio” is an indicator that’s calculated by dividing the open curiosity with the trade reserve. In easier phrases, what this metric tells us about is how a lot leverage Bitcoin futures traders are utilizing in the intervening time.
Right here, “open curiosity” is the measure of the full quantity of futures contracts open on derivatives exchanges. And the “trade reserve” is the full quantity of cash at present current in wallets of all by-product exchanges.
When the worth of the Bitcoin leverage ratio goes up, it means traders have began so as to add extra leverage to their positions.
However, a decline reveals futures holders are closing up their positions. This can be because of mass liquidations or due to traders opting to take much less danger proper now.
A mass liquidation occasion (typically referred to as an extended or brief squeeze) happens when the worth of Bitcoin makes a pointy swing, resulting in a cascade of liquidations available in the market.
Now, here’s a chart that reveals the pattern within the indicator over the previous week:
Appears to be like just like the ratio has been at excessive values not too long ago | Supply: CryptoQuant
As you’ll be able to see within the above graph, whereas the worth of the coin has gone down, the leverage ratio has remained at excessive values.
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The open curiosity has additionally declined barely, which suggests there are fewer positions open at present. This suggests that the common leverage per place has truly gone up.
The quant within the submit believes that this pattern might present that Bitcoin traders are actually getting bolder and taking extra dangers.
For the reason that funding price is about impartial proper now (one other indicator that may assist us estimate the ratio between longs and shorts), it implies there are about as many lengthy positions as brief positions.
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The value motion within the close to future could also be of curiosity as a pointy transfer in both course may cause a squeeze and push the worth of Bitcoin additional in that course.
On the time of writing, Bitcoin’s worth floats round $41.4k, up 5% within the final week.
BTC's worth appears to have plunged down over the previous day | Supply: BTCUSD on TradingView
Featured picture from Unsplash.com, charts from TradingView.com, CryptoQuant.com