Journalist
Posted:
- An increase in leverage points to rising risks and potential liquidations in the Bitcoin market.
- Traders are confronted with increased volatility, since positions with high risk can cause competitive price corrections.
Bitcoin’s [BTC] Unpredictable price movements have long -term investors, but recent data suggest that volatility can rise. An increase in leverage trading positions increases red flags, indicating a potential market shift.
While traders borrow capital to bet in the direction of Bitcoin, the risk of large -scale liquidations is growing. This increasing storm of risky positions can significantly influence Bitcoin’s price process.
Do we see the calmness before the storm, or are we approaching the last phases of a bullish rally?
Leveraged Trader sentiment: why does it matter?
When sentiment is overly bullish or bearish, the sentiment of the leverage trader means a market that is ripe for volatility. Traders are more often liquidated when the market moves against them.
Higher leverage leads to more dramatic price shifts, which activates a cascade of liquidations. This feedback loop can aggravate price fluctuations, making it an important indicator for the coming unrest on the market.
An increase in leverage and rising liquidation risks
Recent recent information Of the sentiment graphics of leverage workers, a strong increase in the lifting tree positions, whereby the sentiment index is now being retained above 2.0.
This level indicates that traders are heavily exposed to leverage, a condition that is historically linked to increased volatility and masses.
Previous peaks in this metric have often preceded forced long liquidations, which causes rapid price falls.
Source: Alfractaal
Bitcoin’s recent rally corresponds to the increase in leverage, which enhances the pattern of lever -controlled price movements. Past sentiment peaks have sometimes marked local soils as a result of the seller’s exhaustion.
However, the current trend indicates a greater chance of long squeezing. As surviving long positions relax, Bitcoin can be confronted with sharp corrections, making this a critical time for traders in an unstable market.
To reveal some leverage piles from the past
A look at the sentiment of Bitcoin’s leverage in the past two years shows a clear correlation between extreme sentiment lectures and large market covers.
Spikes in the sentiment index have often preceded considerable decline. This was seen in mid -2023 and at the end of 2024 when excessive leverage led to large liquidations.
The increase in the beginning of 2024 in sentiment in line with the breakout rally from Bitcoin. However, similar conditions in earlier cycles led to aggressive long squeezing. The sentiment index is now near 2.0, a level that has previously caused consolidation or sharp corrections.
If history repeats itself, increased leverage can cause liquidations, which increases the volatility of downward descent. This situation emphasizes the need for effective risk management.
What is the next step for BTC?
Bitcoin’s recent decline up to $ 91,614 coincides with weakening momentum, because important technical indicators suggest potential downward risks. At the time of writing, the RSI was at 34.24 and approached over -sold territory and signaling intensively for the sales pressure.
In the meantime, the OBV remained in a downward trend, which indicates a decreasing purchase interest – a unions sign for bullish continuation.
Source: TradingView
This scenario is in line with the broader context of excessive leverage in the market. If long traders start to wrap their positions because of liquidations, Bitcoin can be confronted with a sharper correction and test lower support levels.
However, if BTC stabilizes itself and the RSI is recovering, a reliever can be on the horizon.
