On January 12th, Maartunn, who works as a community on-chain analyst at CryptoQuant, raised a concern about Bitcoin‘s “Estimated Leverage Ratio” increasing dramatically across four major exchanges: Gate.io, Bybit, HTX Global, and Deribit. This increase in the Estimated Leverage Ratio (ELR), which is calculated as the ratio of open interest in Bitcoin futures to exchange reserves, might indicate a potential overheating of the futures market or unusually low reserves on these exchanges.
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As an analyst, I’ve noticed a significant surge in ELR (Exchange Liquidation Ratio) on Gate.io, which seems to be fueled by a substantial increase in open interest over the past month. According to data provided by Maartunn, open interest has skyrocketed from roughly $1.5 billion to an astounding $6.4 billion within just 30 days. Historically, Gate.io has consistently shown high ELR figures between November 2021 and October 2022, a period that encompasses Bitcoin’s all-time high to the bottom of the 2022 bear market. This trend seemed to have settled down, but now it appears to be reversing, leading me to ponder about renewed risk-taking activities on the platform.
Bybit is well-known for keeping its Enlarged Liquidity Ratio (ELR) above 1 for over two years straight, a feat that has set it apart. In his speech, Maartunn mentioned the “Bybit apes,” a label for traders who prefer high leverage. This trading style, while common among Bybit’s users, can amplify the possibility of abrupt and steep fluctuations in Bitcoin’s price.
HTX Global, previously known as Huobi, has seen a significant surge in open interest, growing from approximately $150 million to an impressive $3 billion within just under a year. This growth indicates that the platform’s popularity is on the rise, but it’s worth noting that this increase hasn’t been mirrored by a similar boost in exchange reserves. Maartunn finds this unusual, as he suggests that without a corresponding expansion of reserves (either in Bitcoin or stablecoins), the rise in leverage could indicate a more significant imbalance.
Deribit, one exchange under scrutiny, experienced an unusual surge in activity. However, Maartunn believes this increase may be less significant due to what he suspects could be an undisclosed internal address influencing the ELR data. Despite Deribit’s reputation for a strong options market, Maartunn proposes that the inflated values don’t seem to be directly connected to the widespread high-leverage trading activities observed at Gate.io, Bybit, or HTX Global.
Maartunn makes clear that his analysis is not meant to instill fear, apprehension, or doubt, but rather to present data for careful consideration in making informed choices. In essence, he’s saying: “First off, I’m not trying to create a state of fear, uncertainty, and doubt – instead, I’m offering data and thoughts to ponder over. Utilize this information to help steer your personal decisions,” he wrote, drawing attention to the valuable insights gleaned from the fall of FTX in the crypto community.
Additionally, he suggests that it may be prudent to reduce the amount of funds kept on cryptocurrency exchanges because of possible risks from counterparties, encourages careful consideration when participating in margin trades, particularly when Exchange Liquidation Ratio (ELR) values are high, and advocates for using platforms like Binance, BitMEX, Kraken, Bitfinex, and OKX as they currently have better ELR figures.
At press time, BTC traded at $90,768.
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2025-01-13 23:41