Bitcoin Analysis: Week 17 - (Part 5 out of 7)
But what about the ‘leveraged’ market?
The cryptocurrency market very risks willingly in comparison with other financial markets. Investors are not scared away by losing 30% of their investment within hours, a matter of fact they are willing to buy the dip. However, the same ideology is being seen in leveraged trading.
The BTC estimated leverage ratio shows the following: The exchange's open interest divided by their BTC reserve which shows how much leverage is used by users on average. The indicator allows understanding of if the market is exposed to high leverage. If the market is overleveraged, it makes the market very volatile and vulnerable. The house of cards principle works here, a small change and it will all come down.
The funding rate of Bitcoin did reset and this is very healthy for the market. A high funding rate indicates a potentially overleveraged market, and as we highlighted above that has direct implications.
