Bitcoin’s Leverage Ratio Hits Yearly High — Implications for the Market
Key Takeaways
- This year, Bitcoin’s leverage ratio has climbed to the highest level, indicating risky trader bets.
- Despite that, liquidation in the market is much lower than during the trade wars.
- Analysts expect Bitcoin price to rebound after the recent consolidation below the $100,000 mark.
Bitcoin’s leverage ratio has hit a yearly high, rising as high as $0.26 on Feb. 13, according to data from CryptoQuant. This milestone happened amid the cryptocurrency’s struggles to rebound to $100,000.
The leverage ratio is calculated as the open interest divided by its coin reserves. This metric tells one how much leverage traders are using. When the ratio increases, more investors take on higher leverage risks in the derivatives market.
A decrease, on the other hand, indicates skepticism in high-risk positions. Here’s what the rising leverage ratio could mean for Bitcoin’s price and the broader crypto market.
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High Leverage, Low Liquidations
Bitcoin’s reaching its highest leverage ratio signals that traders are increasingly using borrowed funds to amplify their positions. This surge could make traders profitable if the BTC price moves in the direction of their bets.
However, it also raises the stakes for the market and exposes them to higher risks of liquidation if the market turns against their positions.
Bitcoin Estimated Leveraged Ratio | Credit: CryptoQuantDisclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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