While Bitcoin attracts attention due to the investment story from major institutions, Ethereum ($ETH ) stands out in the market as the top choice for traders using leverage to maximize profits.
ETH's leverage ratio hits a new peak
According to data from #CryptoQuant , the estimated leverage ratio of ETH reached 0.57 on January 3, 2025, a significant increase from 0.37 at the end of Q4 2024.
This ratio is calculated by dividing the total open interest in standard futures and perpetual futures contracts by the total amount of ETH in the wallets of exchanges that support futures trading.
Compared to $BTC , the leverage ratio of ETH is currently double, with BTC only reaching 0.269, although this is the highest level since the beginning of 2023.
Why is a high leverage ratio important?
Leverage allows traders to control a larger position than the capital they actually have. For example: With a 10:1 leverage ratio, a trader only needs to deposit $1,000 to control a position worth $10,000.
High leverage offers the opportunity for significant profits but also comes with the risk of liquidation when the market goes against predictions, causing strong price volatility.
Currently, the leverage ratio of ETH exceeds 0.5, indicating a large amount of leveraged trading occurring in the futures market compared to the actual amount of ETH in wallets on exchanges.
ETH – Twice the volatility compared to Bitcoin?
With superior leverage, ETH may witness stronger price volatility #bitcoin in the near future. This means investors need to be mentally prepared for unexpected fluctuations, both in gains and losses.
Conclusion
Ethereum is becoming the focus of risk-seeking traders due to its ability to use leverage to amplify profits. However, the high leverage ratio also puts ETH in a position of greater volatility, increasing the risk of liquidation when the market is unstable.
Advice: Despite the great opportunities, investors need to be cautious and manage risk carefully when trading ETH with high leverage.