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Estimated leverage ratio relative to price trend

PreviousFunding rates relative to price trendNextAdjusted SOPR (aSOPR)

Last updated 3 years ago

Estimated leverage ratio is defined as the ratio of open interest divided by the reserve of an exchange.

Estimated leverage ratio
Price trend
Implications

High and rising

Rising

Over-leveraged long positions, potential bearish reversal

Remains high

Falling from peak

Traders buying the dip on leverage, exposing themselves to a long squeeze

High and rising

Falling

Over-leveraged short positions, potential bullish reversal

Remains high

Falling from bottom

Traders shorting the spike on leverage, exposing themselves to a short squeeze

When estimated leverage ratio is falling, it indicates a reversal is taking place.

When estimated leverage ratio is low, it indicates that leverage levels are low (significant de-leveraging has taken place).

Sources of estimated leverage ratio data are:

Cryptoquant
Glassnode