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Ether’s Record-High Leverage Ratio of 0.57 Is More Than Double That of Bitcoin Ether stands out relative to BTC as the go-to coin for traders looking to boost returns with the use of leverage.
What to know:
Investors are taking high leverage risks on ether futures.
The so-called leverage ratio of ETH is significantly higher than that of BTC.
While Bitcoin (BTC) is dominating institutional narratives, Ethereum’s Ether (ETH) stands out as the go-to token for traders looking to maximize returns through leverage.
The estimated leverage ratio of Ether, which measures the degree of leverage employed by traders, rose to a new high of 0.57 on Wednesday, marking a significant increase from 0.37 at the beginning of the last quarter of 2024, according to data tracked by the analysis firm CryptoQuant.
The ratio is calculated by dividing the accumulated open interest in standard futures and perpetual futures contracts listed worldwide by the total amount of ETH in wallets linked to exchanges that offer futures trading.
An increasing ratio suggests that traders are increasingly using leverage, indicating a rise in risk-taking and speculation in the market. Leverage allows traders to control larger positions in the market with a relatively small capital base.
For example, if an exchange offers a leverage ratio of 10:1, a trading entity can control a position of $10,000 with only $1,000 in margin deposit. The use of leverage increases both profits and losses and raises the risk of liquidations (forced closure due to margin shortfall) when the market moves against leveraged positions, a dynamic that often generates volatility.
The Ether leverage ratio of over 0.5 means that a significant amount of leveraged trading is taking place in the futures market relative to the availability of actual coins in the exchange wallets.
The Ether leverage ratio of over 0.5 indicates that a substantial amount of leveraged trading is taking place in the futures market compared to the actual coins available in exchange wallets.
This level of leverage is considerably higher than that of Bitcoin, which has an estimated leverage ratio of 0.269 at the time of publication, the highest since early 2023, but still well below the all-time high of 0.36 observed in October 2022.
Therefore, do not be surprised if Ether experiences price volatility twice that of Bitcoin in the near future.
