Bitcoin Leverage Ratio Sinks As Market De-Risks Amid Uncertainties

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On-chain data shows that the ratio of Bitcoin leverage has been declining recently as market declines amid macro uncertainties.

Bitcoin Leverage Ratio Sharps Fall Over The Last Week

According to the latest weekly report from Glassnodethe BTC future open interest rate leverage ratio has declined in the last week as investors de-risk their assets.

The “leverage ratio of future open interest rate” is an indicator that is defined as the ratio between the market open contract value and the total market cap of Bitcoin.

In simpler terms, what this metric tells us is the degree of leverage that an average user currently uses in the BTC market.

When the value of the ratio increases, it means that users increase their leverage as they take more risk. High values ​​of the indicator may imply that the Bitcoin market is overvalued at present. And so, it may be more prone to a liquid event.

On the other hand, low values ​​of the metric mean that investors are holding their positions at low risk now. The market is generally more stable during these periods, as the probability of a downward event decreases.

Related Reading | JPMorgan Puts Bitcoin At $ 150,000 In The Long Term, But What About Its ‘Fair Value’?

Now, here’s a chart that shows the trend in the Bitcoin futures open interest rate leverage ratio over the past year:

Bitcoin Leverage Ratio

Looks like the value of the indicator has declined recently | Source: The Glassnode Week Onchain - Week 7, 2022

As you can see in the chart above, the Bitcoin leverage ratio seems to have fallen sharply over the last seven days.

However, unlike many other pivotal events during 2021, this recent decline has not been marked by liquid pressure.

Related Reading | Bitcoin Active Addresses Exceed 1.02M Three Days In A Row, What Happened Last Time

The main thrust behind this trend seems to be investors choosing to de-risk their assets by closing their futures positions.

The report notes that future users may display this behavior in response to the many macro uncertainties currently hovering over the Bitcoin market.

As the current values ​​of the indicator are very close to a range that usually meant a more stable market, the price of the crypto may not show much volatility in the coming days.

BTC price

At the time of writing, the price of Bitcoin is floating around $ 44.2k, up 2% in the last seven days. Over the past month, the crypto has gained 3% in value.

The chart below shows the trend in the price of BTC over the last five days.

Bitcoin price chart

BTC's price seems to have shown some sharp upwards momentum over the last twenty-four hours | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, Glassnode.com

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