Over the past week, Bitcoin (BTC) has been enjoying the attention of all categories of investors; from short-term traders to institutional players. This can be seen in the strong performance of Bitcoin ETFs in the past week. Similarly, the Bitcoin derivatives market seems to be seeing an increase in risk-taking behavior among traders as shown by recent on-chain data.
Bitcoin Market Now In ‘Danger Zone’ – What’s Happening?
Leverage is a tool that allows traders to control large positions with relatively little money. While leverage helps traders and investors maximize their potential profits, it opens them up to greater risks, especially when market volatility is high.
In a recent Quicktake post on the CryptoQuant platform, an analyst with the pseudonym Crazzyblockk revealed that there has been an increase in the use of the measure among Bitcoin market participants. This on-chain view is based on the Estimated Leverage Ratio (ELR) metric, which measures the ratio of open interest in futures contracts to the coin’s storage on the exchange.
Crazyblockk noted that reserves of other large-cap stablecoins are also considered in the calculation of the Estimated Leverage Ratio. “This is based on the idea that stablecoins have been used more and more as collateral for exit trading in recent years,” the analyst said.
The Estimated Leverage Ratio serves as an important indicator in assessing the value of leverage used by market participants in derivatives trading. According to the CryptoQuant analyst, the ELR metric has seen a significant increase in the past few months, indicating increasing open interest and a decrease in exchange rates, especially Bitcoin.
In addition, the Bitcoin derivatives market now seems to have entered a risky area due to the large increase in the ratio used by market participants. According to the Quicktake post, this means that the market is vulnerable to automatic price movements in any direction. Therefore, short-term traders may want to approach the market with caution.
Has BTC Price Formed Local Highs?
As of this writing, the price of Bitcoin is around $68,400, not showing much change from the previous day. According to data from CoinGecko, the first cryptocurrency has risen more than 8% in the past week.
In a separate Quicktake post, the analyst revealed that the price of Bitcoin may undergo a short correction after hitting the top of the zone. This analysis is based on the increase in unrealized profits of Bitcoin traders in recent weeks.
According to CryptoQuant data, the unrealized profit of BTC traders has exceeded $ 7 billion, which indicates a possible selling pressure in the near future. And the risk of a price pullback increases when investors are sitting on significant unrealized gains, as there is a growing temptation to take profits.
