Bitcoin leverage ratio reaches new highs

The estimated leverage ratio for Bitcoin (BTC) hit a new all-time excessive final evening in response to CryptoQuant. Further metrics level to rising leveraged curiosity, however liquidations have remained comparatively low. 

According to on-chain analytics useful resource CryptoQuant, whereas the Bitcoin value 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 outcome exhibits how a lot leverage merchants are utilizing on common.

The next ratio, similar 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, it is trended upwards since June 2019. 

Estimated leverage ratio for Bitcoin. Source: CryptoQuant

Most cryptocurrency exchanges supply leverage buying and selling with FTX, Huobi and Binance main the way in which. They have all agreed to cut back the quantity of leverage accessible to merchants with a purpose to stop mass liquidation occasions, such because the one seen in September final yr when $3.5 billion longs and shorts had been liquidated.

Nonetheless, it hasn’t slowed exchanges plans to convey 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 Stock Exchange. According to the Wienerborse, Austrian daredevils will quickly be capable to entry as much as 20x leveraged BTC trades.

Related: Here’s why Bitcoin merchants say a drop to $38K is the worst case state of affairs

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

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

Analyst Will Clemente summed it up adequately in a tweet. “Could still resolve to the upside. All I know for sure is that this party is just getting started.”