Cryptocurrency markets may be overheating during the current parabolic rally, with some industry leaders warning of an incoming deleveraging ahead of the next leg up.
Crypto investor sentiment has risen to 80, or “extreme greed” on Nov. 12, a day after Bitcoin (BTC) price surpassed the $85,000 record high on Nov. 11, according to data from the Crypto Fear & Greed Index from alternative.me.
Crypto Fear & Greed Index, three-month chart. Source: alternative.me
The last time the index had a score of 80 was on April 9, just before Bitcoin saw an over 18% correction in the following three weeks, from over $69,135 to its bottom above $56,500 on May 1, Bitstamp data shows.
BTC/USD, 1-day chart. Source: TradingView
Despite the potential correction signal, most analysts are bullish on Bitcoin’s price trajectory leading into 2025.
Bitcoin approached the $90,000 high on Nov. 12 after staging its best weekly run since the United States banking crisis in 2023, which saw it add over $413 billion to its market capitalization over the past seven days.
Bitcoin needs deleveraging before reaching $100,000
The current leveraged ratios, or the amount of borrowed funds used for trading positions, is reaching unsustainable levels, warned Kris Marszalek, the co-founder and CEO of Crypto.com.
Marszalek wrote in a Nov. 12 X post:
“Leverage needs to be cleaned up before attack on $100k. Please manage your risk carefully.”
Bitcoin: Estimated leverage ratio, all exchanges. Source: CryptoQuant
Bitcoin’s estimated leverage ratio across all cryptocurrency exchanges stood at 0.217, which marks an over one-year high last seen in October 2023, CryptoQuant data shows.
Investors should brace for volatility ahead of more Bitcoin upside
While investors should exercise caution, Donald Trump’s presidential victory will likely contribute to Bitcoin’s continued price appreciation, according to Shunyet Jan head of derivatives at Bybit, who told Cointelegraph:
“Elevated funding rates and a bullish options skew suggest that both retail and institutional investors are eagerly positioning to capture further upside, with many leveraging their positions. The high funding rates, in particular, underscore the level of leveraged bets, reflecting strong demand for long exposure as confidence continues to build.
Some analysts expect Bitcoin to rise above the record $100,000 mark before the end of the year, driven by expected improvements in macroeconomic conditions due to Trump’s presidential victory.
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