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Estimated leverage ratio relative to price trend

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: