With Bitcoin’s price rallying across spot exchanges, the estimated leverage ratio across exchanges is falling too. The leverage across exchanges has dropped lately, especially since the price crossed $25,000, and a drop in leverage indicates that retail traders are being careful about every move made in the market. In fact, they are especially careful about the demand being generated adequately.
Leverage ratio on top exchanges || Source: CryptoQuant
Across exchanges like Huobi Global, OKE, Bybit, Binance, and BitMEX, the leverage ratio dropped considerably, based on data from CryptoQuant. This is also evident from the consistent trade volume on spot exchanges based on data from CoinMarketCap. As new retail traders enter the market, Bitcoin’s price has more momentum to sustain above the $31,000-level.
Additionally, based on Willy Woo’s Bitcoin Network Momentum chart, Bitcoin‘s network momentum is still nearly at the same level as in late 2020. This means there may or may not be further price discovery. However, while that may be the case, the massive liquidation event and cascading sell orders on exchanges witnessed back in 2018 may not be replicated in the year 2021.
Bitcoin Network Momentum || Source: Woobull Charts
Just as 2020’s Black Thursday reminded traders of the 2018 liquidation event when the cryptocurrency’s price dropped by nearly 40% in a few hours, there is a lot of anticipation regarding an incoming sell-off in the market. However, in light of the current market momentum and the greater market maturity, with key institutional traders sustaining the price above the $30,000-level, the price rally may sustain itself over the course of the present Bitcoin market cycle.
Based on data from Ecoinometrics, Bitcoin’s price is all set for a 10x hike this cycle by October 2021, and the current drop in leverage ratio points towards the same. Besides, metrics like hash rate are pointing to a price rally, rather than a correction.
In such market scenarios, it becomes less likely that 2021 will see the massive liquidation of 2018. The major difference is rapid institutionalization and the market’s high-paced growth, especially since mainstream media is now abuzz with news of more institutions getting interested in Bitcoin and investing in high volumes nearly every week. This is driving growth in the current market cycle and these factors may continue to do so in 2021 as well.