Leverage Usage Across Crypto Exchanges Is Soaring to New Yearly Highs, Signaling a Surge in High-Risk Bets

This trend could increase the risk of volatility in the crypto market, particularly in the Bitcoin market. As more traders use borrowed funds, price swings are likely to become extreme.

Recently, there has been a sharp increase in the leverage usage on cryptocurrency exchanges, which indicates a surge in traders willing to take high-risk bets.

This trend was brought to light by a recent post from Ali, a crypto expert, on the X platform. In this post, Ali highlights the rising leverage usage on crypto exchanges, using the Bitcoin Estimated Leverage Ratio – All Exchanges chart as a reference.

A look at this chart reveals that leverage usage on crypto exchanges has indeed witnessed a significant rise. According to the chart, on January 10, the Estimated Leverage ratio was as low as 0.1498. However, it gradually climbed to reach 0.1811 on February 12.

Coming to mid-March, when the BTC price touched an all-time high, the ratio was around 0.1768. Later, between May 24 and June 11, a sharp increase in the ratio was observed.

Finally, on June 11, it reached a peak of 0.19. It further moved upward to reach 0.20 on July 3. However, it slipped back to a low of 0.16 on August 12.

But, between August 12 and September 13, once again the ratio experienced a sharp rise. This time, it peaked at 0.2158. Since then, the ratio has been mostly oscillating between 0.21 and 0.20. Currently, the Estimated Leverage ratio stands at 0.21.

This chart simply indicates that at this point of the year more investors are engaging in Bitcoin trades with borrowed funds, as the Estimated Leverage Ratio shows the average estimated leverage used by traders on cryptocurrency exchanges.

It is important to note that trading with borrowed funds can be highly lucrative, but it is also extremely risky.

Generally, traders tend to show the courage to enter a market with borrowed money when they are fully confident about the market’s future prospects.

This trend could increase the risk of volatility in the crypto market, particularly in the Bitcoin market. As more traders use borrowed funds, price swings are likely to become extreme.

In conclusion, although the surge in leverage trading suggests that more investors are confident about the future of BTC, it may also expose the market to heightened volatility.

Stay tuned to Coinpedia for more updates!

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