tradingkey.logo

Bitcoin’s Leverage Ratio Hits New High: What Does This Mean BTC?

NewsBTCSep 12, 2024 8:49 AM

The Bitcoin derivatives market has reached a notable milestone, as the estimated leverage ratio for the asset has surged to its highest level of the year, latest data from CryptoQuant shows.

This metric, which tracks the ratio of open interest to coin reserves on exchanges, signals increased leverage use among market participants. The growing trend suggests that investors are taking on more risk by “employing higher leverage,” which could significantly impact Bitcoin’s price.

The Impact Of High Leverage On Bitcoin’s Market

The increase in Bitcoin’s estimated leverage ratio highlights the growing use of leverage among investors in the derivatives market. Leverage allows traders to borrow funds to increase their exposure to Bitcoin without needing to hold the full amount of capital upfront.

While this can amplify profits during periods of market upswings, it also increases the risk of significant losses if the market moves against the position.

Bitcoin Estimated Leverage Ratio.

A high leverage ratio can often be a double-edged sword for the crypto market. On the one hand, it may indicate that investors are increasingly confident in Bitcoin’s potential for an upward move, especially if the market sees a breakout.

On the other hand, if Bitcoin’s price continues to decline, it could lead to a wave of liquidations as overleveraged positions are forced to close, exacerbating the downward pressure.

This trend of rising leverage has drawn attention from various market analysts. CryptoQuant analyst EgyHash pointed out that the estimated leverage ratio reaching its highest point this year could lead to increased volatility in the market.

The higher the leverage, the more sensitive the market becomes to price swings, as even small moves can trigger liquidations and create cascading effects.

Analysts Weigh In On Bitcoin Future

Meanwhile, Bitcoin’s price continues to face challenges, particularly its inability to break above key resistance.

The cryptocurrency has struggled to maintain momentum, and despite the increased leverage in the market, Bitcoin has experienced a mere 0.2% increase over the past 24 hours and a 2.1% drop over the past week. As a result, the asset is now trading below $57,000, with a current price of $56,871.

Bitcoin (BTC) price chart on TradingView

While Bitcoin’s price remains under pressure, several prominent crypto analysts have shared their perspectives on what lies ahead for the cryptocurrency.

Among them is the analyst known as CryptoBullet, who recently compared Bitcoin’s current cycle to previous bull markets.

In a post on X, CryptoBullet highlighted the similarities between the present market and Bitcoin’s 2013 cycle, noting that the Stochastic Relative Strength Index (Stoch RSI) has shown patterns that mirror those seen during the 2013 rally.

CryptoBullet’s analysis suggests that Bitcoin could enter the final phase of its current cycle, with the potential for a “Wave 5” price surge that could push the asset to new highs.

#Bitcoin 1M Big Picture

This cycle doesn’t look like the 2017 or 2021 cycle. IMO it’s more like 2013 and Stoch RSI confirms it?

This cycle Stoch RSI peaked in March and during this 6-Month Consolidation in Wave 4 the Stoch RSI went lower than in 2016-2017 or in H2 2020-2021… https://t.co/Ni9NHHKxis pic.twitter.com/nreQcpAIFP

— CryptoBullet (@CryptoBullet1) September 10, 2024

While the analyst acknowledged that this cycle differs from those of 2017 and 2021, the technical indicators point to the possibility of a higher high on Bitcoin’s price chart shortly.

Featured image created with DALL-E, Chart from TradingView

Reviewed byTony
Disclaimer: The content of this article solely represents the author's personal opinions and does not reflect the official stance of Tradingkey. It should not be considered as investment advice. The article is intended for reference purposes only, and readers should not base any investment decisions solely on its content. Tradingkey bears no responsibility for any trading outcomes resulting from reliance on this article. Furthermore, Tradingkey cannot guarantee the accuracy of the article's content. Before making any investment decisions, it is advisable to consult an independent financial advisor to fully understand the associated risks.

Recommended Articles

tradingkey.logo
tradingkey.logo
Intraday Data provided by Refinitiv and subject to terms of use. Historical and current end-of-day data provided by Refinitiv. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.
* References, analysis, and trading strategies are provided by the third-party provider, Trading Central, and the point of view is based on the independent assessment and judgement of the analyst, without considering the investment objectives and financial situation of the investors.
Risk Warning: Our Website and Mobile App provides only general information on certain investment products. Finsights does not provide, and the provision of such information must not be construed as Finsights providing, financial advice or recommendation for any investment product.
Investment products are subject to significant investment risks, including the possible loss of the principal amount invested and may not be suitable for everyone. Past performance of investment products is not indicative of their future performance.
Finsights may allow third party advertisers or affiliates to place or deliver advertisements on our Website or Mobile App or any part thereof and may be compensated by them based on your interaction with the advertisements.
© Copyright: FINSIGHTS MEDIA PTE. LTD. All Rights Reserved.