The Bitcoin leverage ratio is displaying a promote sign proper now, indicating that the market might flip bearish, not less than within the quick time period.
Bitcoin Leverage Ratio Says Not A Good Time To Buy Right Now
As identified by a CryptoQuant publish, the estimated leverage ratio signifies that this may not be the perfect time to purchase BTC.
The all exchanges estimated Bitcoin leverage ratio is an indicator that’s calculated by taking the ratio of open curiosity divided by the reserves of all exchanges.
Estimated Leverage Ratio = Open Interest ÷ Amount of Reserve
For these unfamiliar with futures buying and selling, the “open interest” refers back to the complete variety of contracts held by customers on the finish of a buying and selling day. The all exchanges reserve is of course the overall quantity of Bitcoin held in wallets of all exchanges.
The leverage ratio indicator can present how a lot leverage is utilized by a dealer on common. When the worth of the metric goes up, it means merchants have gotten more and more assured of their positions.
Related Reading | New To Bitcoin? Learn To Trade Crypto With The NewsBTC Trading Course
Similarly, a downtrend within the worth of the indicator implies the other. With the assistance of those developments, it turns into potential to know whether or not merchants are taking a excessive danger or a low danger.
Now, right here is how the newest chart for the Bitcoin leverage ratio appears to be like like:
The BTC leverage ratio barely strikes up | Source: CryptoQuant
As the above graph reveals, the motion of the indicator can be utilized to inform the place the BTC worth would possibly head subsequent.
Related Reading | As Crypto Market Goes Into “Extreme Greed,” Is Bitcoin Set For New All-Time High?
The leverage ratio transferring down normally alerts an excellent shopping for spot, whereas its worth going up has instructed in any other case all year long.
Presently, the metric’s worth is transferring upwards, which means it’s not an excellent time to purchase extra Bitcoin, and the coin may very well be observing a short-term correction quickly.
At the time of writing, Bitcoin’s worth is round $50.9k, up 6% within the final 7 days. Over the previous month, the crypto has gained 13% in worth.
The under chart reveals the developments within the worth of the coin during the last three months:
Bitcoin plunges down | Source: BTCUSD on TradingView
After struggling just under the $50k worth vary for some time, BTC appears to have lastly gained some strong floor above the mark.
Yesterday, Bitcoin nearly reached $53k in a pointy transfer up, however has since fallen off drastically as the value now floats under $51k.
If the leverage ratio is something to go by, BTC might flip bearish and see some downtrend development quickly. However, it’s more likely to be solely a short-term correction as different indicators nonetheless present that the crypto is bullish in the long run.