August 12, 2022

On-chain information exhibits the Bitcoin leverage ratio nonetheless has a really excessive worth, an indication that has normally 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 submit, the BTC all exchanges leverage ratio remains to be fairly excessive, suggesting that the crypto may nonetheless see additional downtrend.

The “leverage ratio” is an indicator that’s outlined because the ratio between the open curiosity and the all derivatives alternate reserve.

Right here, the “open curiosity” is a measure of the whole quantity of Bitcoin futures positions at the moment open within the derivatives market.

And the “derivatives alternate reserve” is simply the whole variety of cash at the moment 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 in the intervening time. An extra of leverage normally 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 worth since customers aren’t taking a lot threat.

Now, here’s a chart that exhibits the pattern within the Bitcoin all exchanges leverage ratio over the past 12 months:

The worth of the metric appears to have been fairly excessive in latest days | Supply: CryptoQuant

As you may 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 worth has subsequently plunged down.

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Mass leverage flushes like these are referred to as “liquidation squeezes.” Throughout such occasions, liquidations cascade collectively and amplify the worth transfer that triggered the squeeze.

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Because the worth moved in the identical route because the squeeze in these situations, they have been all examples of a “lengthy squeeze.”

It appears just like the ratio’s worth is as soon as once more excessive proper now. If an analogous pattern as in the previous couple of months follows this time as properly, then a protracted squeeze could also be coming  quickly and taking Bitcoin in for an additional plummet.

BTC Worth

On the time of writing, Bitcoin’s worth floats round $20.5k, up 4% within the final week. Over the previous month, the crypto has misplaced 30% in worth.

Bitcoin Price Chart

Appears to be like like the worth of the crypto has been happening over the previous couple of days | Supply: BTCUSD on TradingView
Featured picture from mana5280 on Unsplash.com, charts from TradingView.com, CryptoQuant.com