The ELR for BTC touched a new high. There is a fresh indication of greater growth leveraged interest. Liquidity for Bitcoin remains relatively low though.
According to CryptoQuant, the on-chain analysts, even as Bitcoin slid down for a record in one day, its estimated leverage ratio touch 0.224, which was a new record. The metric is arrived at by the division of exchange open interest with coin reserve. This shows the leverage traders use on average.
A ratio high than that, say around 0.22, shows that the investors are going for high leverage risk for Bitcoin.
On the other hand, a lower value means traders are progressively averse to risk in their derivatives trading. The estimated BTC leverage ratio has shown an upward movement from June 2019.
Bitcoin: Most Cryptos Offering Leverage Trading
A majority of the cryptocurrency exchanges give leverage trading, the leaders being Binance, Huobi, and FTX. They have agreed to bring down the leverage amount that is accessible to traders. This could avert mass liquidation, as happened in September 2021 with $3.5B shorts and longs got liquidated.
But it has not slowed down exchange plans to take leverage trading to bigger audiences. The FTX exchange CEO, Sam Bankman, has informed on social media that the FTX 20X LBI was registered on the Viennese stock exchange. Wiener Borse has informed that this will allow Austrian daredevils to access as much as 20X leveraged Bitcoin trades.
It has been also observed that just $500M worth of liquidations happens to count all exchanges despite around a 10% drop in the last 3 days.
It is strange to notice that despite a drop in prices, liquidation remains steady and the leverage ratios have hit record highs. Is it an indication of future volatility?
Will Clement, the analyst, has summarized that he sees a resolution toward the positive and feels that the movement has merely started.