Bitcoin leverage ratio reaches new highs

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The estimated leverage ratio for Bitcoin (BTC) hit a brand new all-time excessive final night time, based on CryptoQuant. Additional metrics level to rising leveraged curiosity, however liquidations have remained comparatively low. 

In line with on-chain analytics useful resource CryptoQuant, whereas the Bitcoin price fell off a cliff over the previous 24 hours, the estimated leverage ratio reached 0.224, an all-time excessive. The metric works by dividing exchanges’ open curiosity by their coin reserve. The consequence exhibits how a lot leverage merchants are utilizing on common.

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A better ratio, comparable to 0.22, signifies that extra buyers are taking excessive leverage dangers. Conversely, decrease values imply merchants are more and more risk-averse of their by-product buying and selling. The blue line on the graph under has trended upwards since June 2019. 

Estimated leverage ratio for Bitcoin. Supply: CryptoQuant

Most cryptocurrency exchanges provide leverage buying and selling, with FTX, Huobi and Binance leading the way. They’ve all agreed to scale back the quantity of leverage obtainable to merchants to stop mass liquidation occasions, such because the one seen in September final yr when $3.5 billion longs and shorts were liquidated.

Nonetheless, it hasn’t slowed the plans of exchanges to carry leverage buying and selling to a wider viewers. Sam Bankman-Fried, CEO of FTX change, tweeted that his “FTX 20x Leveraged Bitcoin Index” has been listed on the Vienna Inventory Change. According to the Wienerborse, Austrian daredevils will quickly be capable to entry as much as 20x leveraged BTC trades.

Associated: Here’s why Bitcoin traders say a drop to $38K is the worst-case scenario

In the meantime, regardless of a circa 10% worth drop over the previous three days, a mere half a billion {dollars} value of liquidations happened throughout all exchanges, according to coinglass.com information (previously ByBt), lower than the $600 million worth of liquidations that happened in minutes in March final yr.

It’s eery to watch the leverage ratio hit all-time highs and liquidations stay regular, all whereas the value stoops decrease. Might extra volatility be within the playing cards?

Analyst Will Clemente summed it up adequately in a tweet: “Might nonetheless resolve to the upside. All I do know for positive is that this social gathering is simply getting began.”