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Bitcoin Leverage Ratio Hits New ATH, Is Another Price Fall Coming?

 


On-chain data shows that the Bitcoin leverage ratio has hit a new all-time high (ATH). This could mean that a price correction could soon follow.

Bitcoin leverage ratio hits new high, correction in sight?

As one analyst noted in a CryptoQuant post, the BTC leverage ratio recently hit a new ATH. This increases the likelihood of a correction soon. The "estimated leverage ratio of all crypto exchanges " is an indicator that estimates how much leverage is used by Bitcoin investors on derivative exchanges on average.

There are two related metrics here. The first is Open Interest, which measures the total number of futures contracts currently open in the market. The other is the “stock exchange reserve”, which indicates how much BTC is secured in the wallets for derivatives.

The value of the leverage ratio is calculated by dividing the open interest by the stock exchange reserve. This metric can be used to determine whether investors are currently assuming low or high risk. If the value of the indicator rises, it means that investors are taking greater leverage. High values ​​can mean that the market is currently overly leveraged, which could lead to higher volatility in Bitcoin.

As you can see in the graph above, the Bitcoin Leverage Ratio indicator has risen sharply recently. CryptoQuant believes that such high values ​​could mean that there could soon be a price correction of the coin that will take all of the excess leverage with it.

Bitcoin has established itself above the $ 50,000 mark in the past few days, but it is currently unclear when the coin will hit higher levels again. If the leverage ratio has its way, the further correction could soon undo this rebound.

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