Bitcoin Market Leverage and Coinbase Premium: What Recent Data Reveals

Samuel Edyme

5 months ago

3 mins read

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As Bitcoin currently faces a downturn and now seeing a recovery suggesting a preparation for its next bull run, market participants appears to be analyzing trends in exchange leverage and liquidity. Particularly, CryptoQuant has pointed out that leverage ratios on centralized exchanges have become a focal point, offering insights into the potential risks and opportunities shaping the crypto market.

The platform’s recent data highlights the importance of assessing these ratios to gauge the financial stability of exchanges and the impact on trading dynamics.

Leverage Trends And Exchange Stability

A detailed analysis revealed that Binance maintains strong reserves relative to its open interest, signaling a strong ability to manage market volatility. In contrast, smaller exchanges like Gate.io and Bybit exhibit higher leverage ratios, raising questions about their capacity to withstand liquidity crunches.

According to CryptoQuant, monitoring these metrics has become even more “critical” in light of past events, such as the collapse of FTX in November 2024, which was triggered by insufficient reserves against high open interest.

Estimated leverage ratio on exchanges. | Source: CryptoQuant

CryptoQuant’s latest findings further highlight the varying leverage strategies employed by major cryptocurrency exchanges. Binance emerged as a leader in maintaining a stable leverage ratio while expanding its Bitcoin open interest from $4.45 billion in December 2023 to $11.64 billion in December 2024.

Despite this growth, Binance’s Bitcoin, Ethereum, and USDT reserves have consistently exceeded its open interest, ensuring liquidity and stability even during volatile market conditions. The exchange’s leverage ratio, which rose modestly from 12.8 to 13.5 over the past year, remains the lowest among its peers.

Total open interest on exchanges. | Source: CryptoQuant

Conversely, exchanges like Gate.io, Bybit, and Deribit exhibit significantly higher leverage ratios of 106, 86, and 32, respectively. CryptoQuant wrote:

These figures show their Bitcoin open interest exceeds or approaches their reserves, with similar patterns observed for Ethereum.

Coinbase Premium: A Key Indicator For Bitcoin Traders

Beyond leverage ratios, another crucial metric shaping Bitcoin market sentiment is the Coinbase Premium. This indicator, which tracks the price difference between Bitcoin on Coinbase and other exchanges, is a barometer for institutional demand and market trends.

A CryptoQuant analyst named BQYoutube suggested that traders adopt a cautious approach based on Coinbase Premium signals: When the premium is negative, it may be wise to stay on the sidelines.

However, a positive premium often signals the return of strong demand, offering a strategic entry point for traders looking to ride major market trends.

Bitcoin Coinbase Premium. | Source: CryptoQuant

According to the latest data, this metric currently sits on the negative side, suggesting to stay on the sidelines. BQYoutube added:

You might miss few small trends with this approach but at least you can ride all the big trends and avoid losses in dips or downtrends.

Bitcoin (BTC) price chart on TradingView — BTC price is moving upwards on the 2-hour chart. Source: BTC/USDT on TradingView.com

Featured image created with DALL-E, Chart from TradingVie

Samuel Edyme

Meet Samuel Edyme, Nickname - HIM-buktu. A web3 content writer, journalist, and aspiring trader, Edyme is as versatile as they come. With a knack for words and a nose for trends, he has penned pieces for numerous industry player, including AMBCrypto, Blockchain.News, and Blockchain Reporter, among others.

Edyme’s foray into the crypto universe is nothing short of cinematic. His journey began not with a triumphant investment, but with a scam. Yes, a Ponzi scheme that used crypto as payment roped him in. Rather than retreating, he emerged wiser and more determined, channeling his experience into over three years of insightful market analysis.

Before becoming the voice of reason in the crypto space, Edyme was the quintessential crypto degen. He aped into anything that promised a quick buck, anything ape-able, learning the ropes the hard way. These hands-on experience through major market events—like the Terra Luna crash, the wave of bankruptcies in crypto firms, the notorious FTX collapse, and even CZ’s arrest—has honed his keen sense of market dynamics.

When he isn’t crafting engaging crypto content, you’ll find Edyme backtesting charts, studying both forex and synthetic indices. His dedication to mastering the art of trading is as relentless as his pursuit of the next big story. Away from his screens, he can be found in the gym, airpods in, working out and listening to his favorite artist, NF. Or maybe he’s catching some Z’s or scrolling through Elon Musk’s very own X platform—(oops, another screen activity, my bad…)

Well, being an introvert, Edyme thrives in the digital realm, preferring online interaction over offline encounters—(don’t judge, that’s just how he is built). His determination is quite unwavering to be honest, and he embodies the philosophy of continuous improvement, or “kaizen,” striving to be 1% better every day. His mantras, “God knows best” and “Everything is still on track,” reflect his resilient outlook and how he lives his life.

In a nutshell, Samuel Edyme was born efficient, driven by ambition, and perhaps a touch fierce. He’s neither artistic nor unrealistic, and certainly not chauvinistic. Think of him as Bruce Willis in a train wreck—unflappable. Edyme is like trading in your car for a jet—bold. He’s the guy who’d ask his boss for a pay cut just to prove a point—(uhhh…). He is like watching your kid take his first steps. Imagine Bill Gates struggling with rent—okay, maybe that’s a stretch, but you get the idea, yeah. Unbelievable? Yes. Inconceivable? Perhaps.

Edyme sees himself as a fairly reasonable guy, albeit a bit stubborn. Normal to you is not to him. He is not the one to take the easy road, and why would he? That’s just not the way he roll. He has these favorite lyrics from NF’s “Clouds” that resonate deeply with him: “What you think's probably unfeasible, I've done already a hundredfold.”

PS—Edyme is HIM. HIM-buktu. Him-mulation. Him-Kardashian. Himon and Pumba. He even had his DNA tested, and guess what? He’s 100% Him-alayan. Screw it, he ate the opp.

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