If you are interested in digital currencies, you might indeed have an idea about some of the terms associated with them. In this regard, we can talk about the leverage ratio. This is one of the most significant terms in the world of digital currency. In fact, if you look at the on-chain data, you will find both Bitcoin, and leverage ratio. At the same time, you can also look at the open interest spike rate. This is a sign that may turn out to be bearish for the crypto’s price.
So would you like to know more about the Bitcoin estimated leverage ratio and other details? Stay with us until the end as we will share some of the significant details here. Let us take a quick glance!
Look at The Bitcoin Estimated Leverage Ratio & Open Interest Surge Up
According to an analyst, the BTC futures market seems to have been heating up during the past day. So before you get to know about what leverage ratio is let us first look over two other metrics. They are open interest and derivatives exchange reserves.
As you know, the open interest is an indicator that measures the total amount of contracts currently open on the Bitcoin futures market. In fact, the metric includes both short and long positions. On the other hand, the derivatives exchange reserve. It tells us about the total number of coins currently present in the wallets of all derivatives exchanges.
How Can You Calculate The Leverage Ratio?
As you know, the leverage ratio is one of several financial measurements. It mainly assesses the ability of a company to meet its financial obligations. So to calculate it we divide the former metric by the latter which gives us the “estimated leverage ratio.” This indicator signifies the average amount of leverage that the users use on derivatives exchanges.
Therefore, if we represent the data in a graph we will find the Bitcoin leverage ratio. We will also get to know how much the open interest has spiked up during the last 24 hours.
Do you know what this signifies? Well, it means that currently not only is the average leverage very high but also the total number of positions is pretty big. At the same time, from the graph, you will also get an idea about the funding rate. This tells us about the ratio between long and short positions. Since there are more long positions in the market currently, the leverage is high. So there are chances for a long squeeze to happen. If it does happen the latest bullish momentum for Bitcoin can slow down.
Do you remain updated regarding the fluctuation of the price of Bitcoin and other digital currencies? Well, then you will know that currently, Bitcoin’s price floats around $23.9k up 3%. This data is as per the past week’s reports. You need to always keep a check on the ups and downs of the prices to get a clear idea about the leverage ratio.
Also read: Eric Schmidt Voices His Liking for Bitcoin