We assess the leverage levels of various crypto exchanges to evaluate their liquidity, default risk, and the extent to which their perpetual futures trading activity is backed by their crypto reserves.
Our analysis calculates the leverage ratio—open interest relative to total reserves—to gauge the degree of leverage employed by traders and the financial health of each exchange. A high leverage ratio may indicate potential liquidity risks.
Binance stands out among major exchanges for maintaining robust reserves despite significant growth in open interest this year. Its reserves in Bitcoin, Ethereum, and USDT comfortably exceed its open interest. Binance also reported the lowest and most stable leverage ratio among major exchanges, with a ratio of 12.8 in December 2023, rising slightly to 13.5 in December 2024. This stability, coupled with a 2.6x expansion in Bitcoin open interest (from $4.45 billion to $11.64 billion), highlights Binance's ability to handle market volatility and cascading liquidations. Smaller exchanges like OKX also maintain low leverage ratios.
In contrast, exchanges such as Gate.io, Bybit, and Deribit have the highest leverage ratios at 106, 86, and 32, respectively. These figures show their Bitcoin open interest exceeds or approaches their reserves, with similar patterns observed for Ethereum.
Monitoring exchange leverage is critical, as high leverage played a key role in the FTX collapse in November 2024. FTX’s reserves plummeted to zero while its open interest remained elevated, exposing the risks of insufficient reserves to back trading activity.
Written by CQ Research
