Bitcoin Leverage Ratio Sharply Falls Down Over The Past Week
In simpler terms, what this metric tells us is the degree of leverage that an average user is currently making use of in the BTC market.
When the value of the ratio increases, it means users are increasing their leverage as they take on more risk. High values of the indicator may imply that the Bitcoin market is overleveraged at the moment. And thus, it may be more prone to a liquidation squeeze event.
On the other hand, low values of the metric mean investors are keeping their positions at low risk right now. The market is generally more stable during these periods as probability of deleveraging events decreases.
Looks like the value of the indicator has declined recently | Source: The Glassnode Week Onchain - Week 7, 2022
As you can see in the above graph, the Bitcoin leverage ratio seems to have sharply fallen off over the last seven days.
However, unlike many other deleveraging events over the course of 2021, this recent decrease wasn’t marked by a liquidation squeeze.
The main push behind this trend looks to have been investors opting to de-risk their holdings by closing out their futures positions.
As the current values of the indicator are very close to a range that has usually meant a more stable market, the price of the crypto may not show much volatility in the coming days.
The below chart shows the trend in the price of BTC over the last five days.
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