Journalist
Posted:
- The increase in leveraged ETH trades on Deribit signals impending price swings.
- Also, key volatility indicators confirmed the presence of volatility in the currency’s spot market.
Ethereum’s steady rise [ETH] Leverage Estimated Ratio on Deribit Derivatives Exchange Indicates Coming Price Swings, CryptoQuant Analyst Joao Wedson has noted in a new report.
The Leverage Estimated Ratio indicator (ELR) measures the average amount of leverage traders use to execute trades on a cryptocurrency exchange. It is calculated by dividing an asset’s open interest by the exchange’s reserve for that currency.
When the ELR of an asset on an exchange increases, it means the traders are using a significant amount of leverage. This can increase both profits and losses and cause price fluctuations.
Conversely, a low ELR indicates that traders are using relatively little leverage, which can result in less volatile price movements.
According to Wedson, Deribit is the “epicenter of high-leverage Ethereum.”
Therefore, a growing ELR on the stock exchange can have consequences for the general market.
He further added:
“Prices on Deribit may show a more negative or positive premium compared to other exchanges, indicating a higher risk when entering into trades on this platform. Open Interest continues to grow daily, indicating a steady increase in demand for leveraged positions.”
Source: CryptoQuant
Increasing volatility in the spot market
Assessing some volatility markers in ETH’s spot market confirmed Wedson’s position.
First, the past three weeks have been marked by a widening gap between the upper and lower bands of ETH’s Bollinger Bands (BB) indicator. When the gap between the bands widens in this way, it indicates greater volatility in the market.
Furthermore, the Bollinger Bandwidth (BBW), which is up 76% since October 22, confirmed the volatile nature of the current ETH market.
Furthermore, ETH’s Average True Range (ATR) – which measures market volatility by calculating the average range between high and low prices over a set number of periods – was 75.54 at the time of writing. The price also maintains an uptrend and has risen steadily in recent weeks.
A rising ATR indicates that the price of an asset is moving more strongly from period to period, indicating the presence of volatility in the market.
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Finally, ETH’s Chaikin volatility was set at 44.42 at press time, up 51% since the beginning of the month. This indicator measures the difference between the high and low prices of an asset over a given period of time.
When the Chaikin Volatility Indicator rises to return higher values, it indicates large price movements and potential volatility.
Source: ETH/USDT on TradingView