A key metric that measures the use of leverage in the Bitcoin (BTC) market continues to fall, suggesting low price volatility ahead.
According to CryptoQuant, the “estimated leverage ratio,” which is the ratio of open interest in Bitcoin divided by reserves held by derivatives exchanges, fell to 0.195 on April 26, the lowest level since December 20, 2021. rice field.
Since October, the ratio has been declining, indicating a sharp decline in the use of leverage.
A lower ratio usually means that the spot market is less sensitive to movements in the derivatives market. In other words, liquidation-driven price volatility like the one seen on the 26th may become rare in the future.
On the other hand, if Bitcoin’s volatility declines, the cryptocurrency market may become more accessible to the general public.
Bitcoin’s estimated leverage ratio has dropped sharply since FTX collapsed last November. FTX was known for its perpetual futures products and offered products with up to 20x leverage.
The continued decline in the estimated leverage ratio indicates that Bitcoin’s nearly 75% year-to-date rally is spot market driven. It is generally said that the spot market represents the behavior of long-term investors, while the derivatives market represents the behavior of institutional investors and skilled traders/speculators.
｜Translation: coindesk JAPAN
｜Editing: Takayuki Masuda
｜Original: Bitcoin’s ‘Estimated Leverage Ratio’ Hits Lowest Since December 2021