Bitcoin leverage ratio surges as market displays fear-driven sentiment .
On Thursday, the world of Bitcoin saw a significant surge in its estimated leverage ratio, signaling a notable uptick in borrowing activity among traders. This development, as reported by CryptoQuant analyst BQYoutube, underscores the prevailing bullish sentiment and increasing high-risk behavior, which could lead to liquidation should market trends take an unfavorable turn. Meanwhile, Coinglass data reveals that the funding rate has catapulted by over 115% since the previous Friday, reaching 0.0124%, a clear indicator of heightened investor greed. Paradoxically, a subdued trading volume in Bitcoin’s spot market suggests a lackluster organic demand at its present price point.
Additionally, the open interest in Bitcoin’s futures and options has ascended by 9% since October 1, reaching an impressive $6.14 billion, thereby accentuating similar risks. Market analysts are unanimously advocating caution, advising a delay in making significant buying decisions until leverage usage and exchange reserves exhibit a decline.
Despite Bitcoin’s outperformance against assets like gold and Treasury Inflation-Protected Securities (TIPS) since June, it encountered a formidable hurdle while attempting to breach the $28,000 resistance level. This resulted in a notable 4.9% correction on Thursday, driving the market into the grips of fear-driven sentiment. As of now, Bitcoin boasts a market capitalization of $520 billion, surpassing global payment processing giant Visa (NYSE:V) and energy behemoth Exxon Mobil (NYSE:XOM). However, it still lags behind its all-time high of $1.3 trillion, recorded in November 2021.
The rising strength of the DXY index and the impressive $4.2 trillion combined assets held by major corporations have somewhat diminished Bitcoin’s appeal as a hedge instrument, particularly in light of the U.S.’s economic resilience. The latest derivatives metrics indicate a dwindling appetite among bullish investors, with futures contract premiums languishing at levels not seen since the advent of BlackRock (NYSE:BLK)’s spot ETF filing.
In the realm of Bitcoin options, the 25% delta skew has shifted into “fear” mode, a direct response to concerns surrounding the Securities and Exchange Commission’s (SEC) postponed decisions on Bitcoin spot ETFs and the exposure of cryptocurrency exchanges to entities linked to terrorism. Protective put options are now trading at a 13% premium, highlighting a lack of confidence among traders, despite Bitcoin’s predictable monetary policy and a 3% gain in the S&P 500 index since June.
From a derivatives perspective, the likelihood of Bitcoin breaking the $28,000 barrier in the short term appears increasingly elusive, underscoring the current climate of market volatility and the imperative for investors to exercise a heightened degree of caution.
