Bitcoin Bearish Signal: Leverage Ratio Is Still Very High

On-chain data shows the Bitcoin leverage ratio still has a very high value, a sign that has usually proven to be bearish for the crypto in recent months. Bitcoin Exchange Leverage Ratio Has Been Going Up In Recent Weeks As pointed out by an analyst in a CryptoQuant post, the BTC all exchanges leverage ratio is still quite high, suggesting that the crypto could still see further downtrend. The “leverage ratio” is an indicator that is defined as the ratio between the open interest and the all derivatives exchange reserve. Here, the “open interest” is a measure of the total amount of Bitcoin futures positions currently open in the derivatives market. And the “derivatives exchange reserve” is just the total number of coins currently stored in wallets of all derivatives exchanges. What the leverage ratio tells us is how much leverage users are taking on average in the BTC futures market right now. When the value of this indicator is high, it means users are taking a large amount of risk in the form of leverage at the moment. An excess of leverage usually leads to higher volatility in the market. Related Reading | Bitcoin On-Chain Data: Miners Deposit Big To Derivatives Exchanges On the other hand, lower values of the ratio can result in lesser relative volatility in the crypto’s price since users aren’t taking much risk. Now, here is a chart that shows the trend in the Bitcoin al...