The futures market has experienced a significant reduction in leveraged positions, comparable to the period during China’s bitcoin mining ban, according to observations by CryptoQuant contributor known as Darkfost.
“The Estimated Leverage Ratio (ELR) dropped to a critical level of -0.25 within three days. This underscores the fundamental impact of geopolitical tensions, particularly the conflict between the US and Iran, on investor behavior and overall market dynamics,” the expert noted.
For comparison, the ELR fell to -0.35 during the “China ban” in May-June 2021.
“However, it took a whole month to reach that point,” the researcher emphasized.
According to him, the rapid decline in the indicator points to a significant reduction in open interest. The reason is not only liquidations but also “voluntary closing of positions by traders seeking to reduce risk.”
“Such a sharp drop in ELR reflects the dominance of bearish sentiment and short-term anxiety. However, it is often in such moments that new opportunities arise,” Darkfost noted.
In the near future, the analyst expects an increase in market volatility, hence “using leverage involves heightened risks.”
Earlier, analyst Omkar Godbole discovered who is actively selling bitcoin above the $100,000 mark.