On-chain data shows that Bitcoin investors have been risk-averse lately as the leverage ratio has remained low in the past few days.
Bitcoin leverage ratio has been low over the past few days
As pointed out by an analyst at CryptoQuant MailInvestors have not taken many risks since the massive rally in the cryptocurrency price a few days ago as the market leverage is currently low.
relevant pointers here.frank interest”, which shows the total amount of Bitcoin futures contracts currently open on all derivatives exchanges.
The “Estimated leverage ratio“Is a measure defined as the ratio between this open interest and the total amount of coins held on all derivative exchanges (exchange reserves).
What this ratio tells us is the average amount of leverage that each Bitcoin futures investor is currently using.
When the index value is high, it means that users are taking a lot of risk at the moment. These values can lead to higher price volatility.
On the other hand, lower ratio values indicate that investors are not currently using much leverage as they are looking to avoid risk.
Now, here is a chart showing the trend in the bitcoin leverage ratio over the past few days:
Looks like the value of the metric is low at the moment | Source: CryptoQuant
As you can see in the above chart, the Bitcoin leverage ratio was quite valuable a few days ago, but the sharp uptrend in the cryptocurrency price brought it back lower as short positions were liquidated.
Since then, the index’s value has remained at these low levels. On the other hand, open interest is still high, which means that investors are still opening new positions in the market.
However, these new positions have lower average leverage associated with them as the ratio indicates. This shows that investors have been unsure about cryptocurrency lately, choosing to take less risk.
The chart also shows the financing rates curve, which is an indicator that tells us about the ratio of long and short positions in the market. At the moment, the metric appears to be positive, which means there are more long positions in the market.
At the time of writing this report, Bitcoin’s price is floating around $47,000, up 10% in the last week. The chart below shows the current price trend over the past five days.
BTC's price seems to have moved sideways in the last few days | Source: BTCUSD on TradingView