The latest on-chain metrics show the behavior of Bitcoin investors, which depicts a pattern of fear over risk-taking as the current leverage ratio has remained low over the past couple of days.
The Continuous Low Leverage Ratio For Bitcoin
In a CryptoQuant post, an analyst pointed out that most investors in the bitcoin network are too risk-averse as they find it difficult to free their minds to make a move since the latest surge in the price of cryptocurrency occurred a few days ago.
As a result, the risk leverage for Bitcoin remains low. The most crucial indicator of the investors’ pattern of behavior is the “open interest,” an indicator of the total volume of Bitcoin futures contracts that is currently applicable to all derivative exchanges in the Bitcoin network.
Furthermore, the estimated leverage ratio is between the open interest and the total amount of tokens available on all exchange reserves on the Bitcoin network.
This means that when the metric’s value is high, it implies that users are open to risk in a particular period. When this happens, the result is that price volatility will be high.
While low values of the percentage show investors not using much leverage at the time, as they are cautious to avoid risk.
Further analysis of the leverage ratio points to a high value a couple of days back. Still, the sudden uptrend in cryptocurrency prices reawakens the leverage ratio as it liquidates some more.
Afterward, the indicator values of Bitcoin have been on the decline. On the other hand, the open interest is still at a higher value, indicating that investors’ activities are still ongoing in the market.
However, the new positions created due to investors’ actions come with a low average value, as the ratio shows. This suggests that investors are unsure about the direction the token is about to take and opt to avoid risk entirely.
The funding rate is an indicator that shows the ratio of the highs and lows of the token in the market as it appears. The metrics appear to be positive, indicating more high positions in the market.
Price Action of BTC
At the time of publication, the price of Bitcoin is hovering around $47,000, which is an increase of 10% over the previous week, and the past five days have seen the price of BTC moving sideways.
The price action has been somewhat bullish considering the highs the leading digital currency has experienced with price recovery and consolidation, shooting it to the top of the crypto market in terms of market cap.
Analysts believe that the ascendancy of the pioneer cryptocurrency is a positive for the market as a whole. This explains why most other digital tokens experience a price increase whenever Bitcoin appreciates.
Ultimately, the performance of Bitcoin has been positive for some time now; it has pulled itself from the slump of recent months and is leading where it matters the most.