Bitcoin’s price rise is due to increased leverage

Bitcoin price has been gaining momentum in recent weeks and recently peaked at over $69,000, which is now just 6% away from its all-time high.

However, the high leverage behind the impressive performance raises concerns about its sustainability. Leveraged trading involves using borrowed funds to increase the potential return on an investment. It allows traders to control a larger position in an asset than they could with their capital alone.

Data from CryptoQuant suggests that the estimated leverage ratio reached a yearly high of 0.22 on October 24th before declining slightly to 0.21 on October 26th. This metric compares the open interest (OI) in futures contracts with the balance of the corresponding exchange.

Last week, open interest in Bitcoin surpassed $40 billion for the first time, setting a new record in the crypto derivatives market.

Although OI fell to around $37 billion over the weekend, the market is up 6% to $40.08 billion in the last 24 hours, according to data from CoinGlass. Unsurprisingly, this helped push the BTC price briefly as high as $69,225 today.

While leverage can increase profits, it also involves significant risks, potentially leading to significant losses and increased market volatility.