The Bitcoin leverage ratio fell recently due to macro risks.
Bitcoin leverage ratio has fallen sharply in the past week
The latest Weekly Report from Glassnode shows that the BTC Futures Open Interest Leverage Ratio has declined in the past week due to investors taking a riskier position.
The “futures open interest leverage ratio” is an indicator that’s defined as the ratio between the market open contract value and the total market cap of Bitcoin.
Simply put, this measure tells you how leveraged an average user currently is in the BTC markets.
If the ratio’s value increases, this means that users have increased their leverage and are taking on greater risk. A high indicator could mean that Bitcoin markets are overleveraged. This indicator could be susceptible to a liquidity squeeze.
Low values of this metric indicate that investors have low risks and are keeping their investments at a low level. As the probability of deleveraging events drops, these periods tend to bring about greater stability in the market.
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Below is a chart depicting the Bitcoin futures open-interest leverage ratio trend over the past one year.
This indicates that the indicator is losing value. Source: Glassnode Week onchain Week 7, 2022| Source: The Glassnode Week Onchain - Week 7, 2022
You can clearly see that Bitcoin’s leverage ratio has fallen dramatically over the last seven working days, as shown in this graph.
However, unlike many other deleveraging events over the course of 2021, this recent decrease wasn’t marked by a liquidation squeeze.
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Investors are attempting to minimize risk by selling their futures holdings. This is the main driver of this trend.
According to this report, futures users might be reacting to macro uncertainty in the Bitcoin market.
The current value of the indicator is very close to the range which has always meant a stable market. This may mean that the cryptocurrency price will not experience much volatility over the next few days.
BTC price
At the time of writing, Bitcoin’s price floats around $44.2k, up 2% in the last seven days. The crypto’s value has increased by 3% over the last month.
Below is a chart showing the change in BTC’s price over the past five days.
Source: BTCUSD on TradingView| Source: BTCUSD on TradingView
Unsplash.com's featured image. Charts by TradingView.com. Glassnode.com's charts.