Quant Explains How Large Bitcoin Leverage Ratio Can Help Turnaround Price
23 Décembre 2021 - 8:00PM
NEWSBTC
A quant has explained how the current large Bitcoin leverage ratio
values can help bring a turnabout to the crypto’s price. Bitcoin
Leverage Ratio Rises To Values Greater Than During The ATH As
explained by an analyst in a CryptoQuant post, the massive leverage
ratio right now might help BTC’s price reverse its trend. The
“Bitcoin leverage ratio” is an on-chain indicator that is defined
as the open interest divided by the (derivative) exchange reserve.
Here, the “open interest” is a measure of the amount of futures
contracts currently open in the derivatives market. While the
exchange reserve tells us how much BTC is stored in exchange
wallets right now. The leverage ratio basically shows the amount of
leverage used by users on average. The metric’s value helps us know
whether Bitcoin investors are taking a high risk or a low risk.
When the value of this ratio moves up, it means investors are
picking up more leverage as they are confident in their positions.
On the other hand, a decreasing trend of the indicator would mean
investors are reducing risk, and closing off their positions.
Related Reading | Growth Of Bitcoin ETFs & Other
Instruments Doesn’t Support Supply Shock Narrative Now, here is a
chart that shows the trend in the Bitcoin leverage ratio over the
last few months: The indicator seems to be rising in value |
Source: CryptoQuant As you can see in the above graph, the Bitcoin
leverage ratio has been riding on an uptrend for a while, and now
has values greater than those during the last price ATH. The quant
has marked peaks of the indicator on the chart and compared them
with the BTC price. Apparently, whenever the metric has reached a
top, the price of the crypto has reversed its trend. Related
Reading | Market Gets Cozy With Bitcoin Trapped? Why BTC Is
Gearing Up For A Short Squeeze The chart also shows another
indicator, the RSI, which highlights whether BTC is currently
overpriced or underpriced. It seems like whichever way this metric
has turned, the price has also reversed in the same direction.
Looking at the chart, currently the leverage ratio seems to be
hitting a peak and the RSI looks to be turning up. If there is
indeed a pattern here, then the price of Bitcoin might change its
direction towards the sky next. BTC Price At the time of writing,
Bitcoin’s price floats around $48.7k, down 2% in the last seven
days. The below chart shows the trend in the value of the crypto
over the past five days. BTC's price surged up a few days ago, but
it has since started moving sideways again | Source: BTCUSD on
TradingView Featured image from Unsplash.com, charts from
TradingView.com, CryptoQuant.com
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