Leverage fires up Bitcoin Rally: Highest price since January 2018

The recent increases in Bitcoin are probably due to leveraged orders.

On 4 November, the cryptographic data website CryptoQuant published a chart showing the estimated leverage ratio on Binance. The ratio is calculated by dividing the open interest rate by the Bitcoin (BTC) reserves and this has reached a new all-time high.

This record was set on 3 November after the estimated leverage ratio (ELR) on Binance jumped to over 0.18 for the first time due to a surge Bitcoin Up in open interest. Shortly thereafter, Bitcoin reached a double bottom at around $13,400.

New data suggests that the increase in Bitcoin to its annual high of over $14,000 may have been fuelled by the leverage effect. This in turn could mean that the market could remain very volatile in the short term.
Estimated leverage on Binance: CryptoQuant
However, Binance also recorded its largest daily BTC outflow on 3 November. In the process, 58,861 Bitcoin flowed off the exchange in 24 hours.

Binance was not alone with such an increase. Data from Skew shows that total open interest in BTC futures has reached a new all-time high of around $5 billion.

The growing open interest was recorded despite the recent decline in BitMEX’s market share. The exchange was accused of money laundering by the US Department of Justice.
Open interest in BTC futures: Skew
According to Messari, the rise in open interest could indicate „bullish sentiment“, provided it is due to long positions. The research company also said the data would indicate that new capital could be flowing into the crypto area:

„Rising prices during an uptrend with rising open interest could mean that new money is flowing into the market“.
The sum of BTCs on the stock exchanges has also been steadily declining since May. This could indicate that buyers are withdrawing Bitcoin from the exchanges and placing it in cold storage for the longer term.

There have also been increasing long positions on Bitfinex since the beginning of October. The number of these has increased from 25,000 to 29,000. Although more short positions have also been opened since 20 October, doubling from 3,250 to 6,770, the bulls clearly have the upper hand.

In the last few hours, BTC has reached a new annual high of USD 14,500.

Posted in Bitcoin