Bitcoin Leverage Hits Lowest Since 2021 China Ban

• BTC’s Estimated Leverage Ratio drops sharply to -0.25
• This marks the lowest level since China’s mining ban in 2021
• Traders are reducing risk by closing leveraged positions

Bitcoin’s Estimated Leverage Ratio (ELR) has seen a sharp drop, plunging to -0.25 in just three days, according to CryptoQuant analyst Darkfost. This marks the lowest level for the metric since China’s sweeping crackdown on crypto mining in 2021. The drop reflects a significant decline in open interest and suggests that traders are actively reducing their exposure to leveraged positions.

Traders Respond to Risky Market Conditions

The decline in the Bitcoin leverage ratio often signals rising caution in the market. Leveraged positions allow traders to amplify their gains but also increase the risk of liquidation during volatile price swings. A sudden dip like this suggests that market participants are pulling back to avoid such risks, possibly anticipating turbulent conditions ahead.

The last time the leverage ratio dropped this low was during a time of major disruption—China’s 2021 crypto ban—which caused a wide-ranging market selloff. Now, the current ELR movement indicates a similar sentiment of risk aversion, though the specific cause remains uncertain.

Lower Leverage May Stabilize BTC Price

While a drop in leverage might seem negative at first, it can also bring stability. With fewer leveraged trades, there’s a reduced risk of sudden liquidations that could drag prices down rapidly. This might provide a healthier foundation for Bitcoin to find stable support before making its next major move.

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