The estimated leverage ratio for Bitcoin (BTC) reached a new all-time high last night according to CryptoQuant. Other metrics point to growing leveraged interest, but liquidations have remained relatively low.
According to on-chain analytics resource CryptoQuant, while Bitcoin’s price plummeted in the last 24 hours, the estimated leverage ratio reached 0.224, an all-time high. The metric works by dividing the open interest of exchanges by their reserve of coins. The result shows the amount of leverage that traders use on average.
A higher ratio, such as 0.22, indicates that more investors are taking high leverage risks. On the contrary, lower values mean that traders are increasingly risk averse in its derivatives operations. The blue line in the chart below has been trending upward since June 2019.
Most cryptocurrency exchanges offer leverage trading, with FTX, Huobi, and Binance leading the way. They have all agreed to reduce the amount of leverage available to traders in order to avoid massive liquidation events, such as the one seen in September last year, when $ 3.5 billion in long and short positions were liquidated.
However, this has not slowed down exchanges’ plans to bring leverage trading to a wider audience. Sam Bankman-Fried, CEO of FTX, tweeted that its “FTX 20x Leveraged Bitcoin Index” has been listed on the Vienna Stock Exchange. According to Wienerborse, Austrian daredevils will soon be able to access BTC trading with up to 20x leverage.
Meanwhile, Despite a price drop of around 10% in the last three days, there were barely $ 500 million in liquidations across all exchanges. according to data from coinglass.com (formerly ByBt), less than the $ 600 million liquidations that occurred in minutes in March last year.
It’s shocking to watch the leverage ratio hit all-time highs and the payouts remain stable, all while the price drops. Could there be more volatility in the short term?
Analyst Will Clemente summed it up appropriately in a Tweet. “It could still be resolved upside. The only thing I know for sure is that this party has just started.”
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