Bitcoin Leverage Ratio Hits New ATH, Is More Price Decline Coming?
27 Diciembre 2021 - 01:00PM
NEWSBTC
On-chain data shows Bitcoin leverage ratio has hit a new all-time
high (ATH). This may mean that a price correction could soon
follow. Bitcoin Leverage Ratio Reaches New Highs, Correction
Incoming? As pointed out by an analyst in a CryptoQuant post, the
BTC leverage ratio has made a new ATH recently. This increases the
possibility of a correction happening soon to flush out all the
excess leverage. The “all exchanges estimated leverage ratio” is an
indicator that estimates how much leverage is used by Bitcoin
investors on derivatives exchanges, on average. There are two
related metrics here. The first is the “open interest,” which
measures the total amount of futures contracts currently open in
the market. And the other is the “exchange reserve” that tells us
how much BTC is stored in derivatives exchange wallets. The value
of the leverage ratio is calculated as the open interest divided by
the exchange reserve. With the help of this metric, it becomes
possible to tell whether investors are currently taking low risk or
high risk. When the value of the indicator rises, it means
investors are taking on more leverage. High values of the metric
may mean the market is currently over-leveraged, which could lead
to higher volatility in Bitcoin. Related Reading | Quant
Explains How Large Bitcoin Leverage Ratio Can Help Turnaround Price
On the other hand, low values of the indicator imply there isn’t
much leverage in the market right now. Here is a chart that shows
the trend in the BTC leverage ratio over the past few months: Looks
like the indicator has recently hit a new ATH | Source: CryptoQuant
As you can see in the above graph, the Bitcoin leverage ratio has
been on the rise lately. Just recently the metric also achieved a
new all-time high. Related Reading | Growth Of Bitcoin ETFs
& Other Instruments Doesn’t Support Supply Shock Narrative The
quant believes that such high values of the ratio may mean that a
correction in the price of the coin could soon come, wiping away
all the excess leverage with it. BTC Price At the time of writing,
Bitcoin’s price floats around $50.9k, up 11% in the last seven
days. Over the past thirty days, the crypto has stacked 6% in
losses. The below chart shows the trend in the price of BTC over
the last five days. BTC's price surged up a few days ago, but has
since moved sideways | Source: BTCUSD on TradingView Bitcoin has
established a footing above the $50k price level in the past few
days, but it’s unclear at the moment when the coin might retest
higher levels. If the leverage ratio is anything to go by, another
correction might soon wipe away this recovery instead. Featured
image from Unsplash.com, charts from TradingView.com,
CryptoQuant.com
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