On-chain information reveals the Bitcoin leverage ratio nonetheless has a really excessive worth, an indication that has often confirmed to be bearish for the crypto in latest months.
Bitcoin Change Leverage Ratio Has Been Going Up In Current Weeks
As identified by an analyst in a CryptoQuant post, the BTC all exchanges leverage ratio remains to be fairly excessive, suggesting that the crypto might nonetheless see additional downtrend.
The “leverage ratio” is an indicator that’s outlined because the ratio between the open curiosity and the all derivatives change reserve.
Right here, the “open curiosity” is a measure of the full quantity of Bitcoin futures positions at present open within the derivatives market.
And the “derivatives change reserve” is simply the full variety of cash at present saved in wallets of all derivatives exchanges.
What the leverage ratio tells us is how a lot leverage customers are taking over common within the BTC futures market proper now.
When the worth of this indicator is excessive, it means customers are taking a considerable amount of threat within the type of leverage for the time being. An extra of leverage often results in greater volatility out there.
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Alternatively, decrease values of the ratio may end up in lesser relative volatility within the crypto’s value since customers aren’t taking a lot threat.
Now, here’s a chart that reveals the development within the Bitcoin all exchanges leverage ratio over the past yr:
The worth of the metric appears to have been fairly excessive in latest days | Supply: CryptoQuant
As you possibly can see within the above graph, each time the Bitcoin leverage ratio has hit a steep worth over the last a number of months, each the indicator and the coin’s value has subsequently plunged down.
Mass leverage flushes like these are referred to as “liquidation squeezes.” Throughout such occasions, liquidations cascade collectively and amplify the value transfer that triggered the squeeze.
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Because the value moved in the identical course because the squeeze in these situations, they had been all examples of a “lengthy squeeze.”
It seems just like the ratio’s worth is as soon as once more excessive proper now. If an analogous development as in the previous few months follows this time as effectively, then a protracted squeeze could also be coming quickly and taking Bitcoin in for one more plummet.
BTC Worth
On the time of writing, Bitcoin’s value floats round $20.5k, up 4% within the final week. Over the previous month, the crypto has misplaced 30% in worth.
Appears like the worth of the crypto has been taking place over the previous few days | Supply: BTCUSD on TradingView
Featured picture from mana5280 on Unsplash.com, charts from TradingView.com, CryptoQuant.com