Bitcoin Turning Bearish? Leverage Ratio Shows Sell Signal

Keshav Verma

1 year ago

3 mins read

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The Bitcoin leverage ratio is showing a sell signal right now, indicating that the market could turn bearish, at least in the short term.

Bitcoin Leverage Ratio Says Not A Good Time To Buy Right Now

As pointed out by a CryptoQuant post, the estimated leverage ratio indicates that this might not be the best time to buy BTC.

The all exchanges estimated Bitcoin leverage ratio is an indicator that’s calculated by taking the ratio of open interest divided by the reserves of all exchanges.

Estimated Leverage Ratio = Open Interest ÷ Amount of Reserve

For those unfamiliar with futures trading, the “open interest” refers to the total number of contracts held by users at the end of a trading day. The all exchanges reserve is naturally the total amount of Bitcoin held in wallets of all exchanges.

The leverage ratio indicator can show how much leverage is used by a trader on average. When the value of the metric goes up, it means traders are becoming increasingly confident in their positions.

Similarly, a downtrend in the value of the indicator implies the opposite. With the help of these trends, it becomes possible to know whether traders are taking a high risk or a low risk.

Now, here is how the latest chart for the Bitcoin leverage ratio looks like:

The BTC leverage ratio slightly moves up | Source: CryptoQuant

As the above graph shows, the movement of the indicator can be used to tell where the BTC price might head next.

The leverage ratio moving down usually signals a good buying spot, while its value going up has suggested otherwise throughout the year.

Presently, the metric’s value is moving upwards, meaning it’s not a good time to buy more Bitcoin, and the coin could be observing a short-term correction soon.

BTC Price

At the time of writing, Bitcoin’s price is around $50.9k, up 6% in the last 7 days. Over the past month, the crypto has gained 13% in value.

The below chart shows the trends in the price of the coin over the last three months:

Bitcoin plunges down | Source: BTCUSD on TradingView

After struggling just below the $50k price range for a while, BTC seems to have finally gained some solid ground above the mark.

Yesterday, Bitcoin almost reached $53k in a sharp move up, but has since fallen off drastically as the price now floats below $51k.

If the leverage ratio is anything to go by, BTC could turn bearish and see some downtrend trend soon. However, it’s likely to be only a short-term correction as other indicators still show that the crypto is bullish in the long term.

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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