On-chain information exhibits the Bitcoin estimated leverage ratio has continued to hit new highs not too long ago, an indication that could possibly be bearish for the value of the crypto.
Bitcoin Estimated Leverage Ratio Continues To Set New Highs
As identified by an analyst in a CryptoQuant post, the BTC leverage ratio has been transferring up since some time now.
The “estimated leverage ratio” is an indicator that tells us how a lot leverage is utilized by Bitcoin customers on common.
The metric’s worth is calculated by taking the ratio between the open curiosity and the reserve. The previous is the whole quantity of derivatives contracts open on exchanges, whereas the latter is the variety of cash saved in derivatives change wallets.
When the worth of the ratio will increase, it means holders are actually taking up extra danger as they make use of a better quantity of leverage.
Such a development can result in greater volatility within the worth of Bitcoin as liquidation danger will increase with growing leverage.
Alternatively, low values of the ratio indicate there isn’t a lot leverage available in the market proper now as customers aren’t taking up a lot danger.
Now, here’s a chart that exhibits the development within the BTC estimated leverage ratio over the previous yr:
The worth of the metric appears to have been going up not too long ago | Supply: CryptoQuant
As you’ll be able to see within the above graph, the Bitcoin leverage ratio has been rising since some time now, and is continuous to set new highs. Which means customers are taking up a variety of danger proper now.
On the similar time, the change reserve has plummeted down, which is often a bullish signal for the value of the coin.
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Nonetheless, the extraordinarily excessive leverage available in the market for the time being could possibly be fairly harmful for the crypto’s final result as excessive values of the metric have typically resulted in sharp corrections prior to now.
It now stays to be seen whether or not the ratio’s worth will come down in a pointy blow down or if it should go down in steps, affecting the value in relatively quick bursts.
On the time of writing, Bitcoin’s price floats round $40.6k, down 13% within the final seven days. Over the previous month, the crypto has gained 4% in worth.
The under chart exhibits the development within the worth of the coin over the past 5 days.
Seems to be like the value of the coin has plummeted down over the past couple of days | Supply: BTCUSD on TradingView
Featured picture from Unsplash.com, charts from TradingView.com, CryptoQuant.com