- There has been an increase in BTCs so far in the past month leverage ratio.
- The lack of corresponding price growth puts the currency at risk of further decline.
Bitcoins [BTC] The estimated leverage ratio has risen in recent days even as its price has fallen. This suggests traders are increasingly taking on more debt or borrowing more money to trade key crypto assets, pseudonymous CryptoQuant analyst BQYoutube finds in a new report.
How much are 1,10,100 BTCs worth today?
BTC’s estimated leverage ratio tracks the average amount of borrowed funds (leverage) that traders use to trade the asset.
When BTC’s leverage ratio rises, it can generally be taken as a sign of bullish sentiment, as it suggests that traders are confident that BTC’s value will continue to rise in price.
However, it can also be a sign of risk taking, as highly leveraged traders are more vulnerable to liquidations if the market turns against them.
This spells “doom” for BTC
According to the CryptoQuant analyst, the increase in BTC’s estimated leverage ratio has “constantly increased along with funding rates and the exchange rate reserve.”
At the time of writing, the coin’s funding rate was 0.0124%. According to data maintained by Mint glassit has risen by more than 115% since October 7.
Source: Coinglass
However, with a decline in the value of BTC in recent days, the increase in the amount of trading with borrowed money indicates a high degree of greed among investors, especially those who hold significant leveraged long positions.
This suggests that people may be betting on a price recovery, and they are doing so at any cost.
BQYoutube further found that the reporting period was also characterized by low trading volume on the main spot coin market.
This suggests that there may not be strong organic demand for the asset at its current price, as market participants interested in trading without leverage rarely do so.
Source: CryptoQuant
According to the analyst, it would be best to wait to make strong buying decisions until the use of leverage and reserves on the exchanges has cooled.
Read Bitcoin’s [BTC] Price forecast 2023-2024
An open interest rate rally carries a similar risk
In addition to growing estimated leverage ratios, funding rates, and exchange reserve, BTC futures and options open interest also increased this month. Data from Santiment estimated the coin’s open interest at $6.14 billion at the time of writing, up 9% since October 1.
Source: Glassnode
While commenting on the impact of rising open interest, another pseudonymous analyst said Signal quantnoted:
“Current open interest has increased since September 23, but is not at a level that would lead to a large-scale liquidation. However, it can quickly reach the liquidation zone at any time, so be aware of the volatility in that case.”