After yesterday’s major crypto market crash, the market appears to be sufficiently deleveraged. It could lead to more stability and set the stage for a recovery, according to CryptoQuant. This assessment is crucial in understanding the current market conditions and potential future movements.
Is the Crypto Market Deleveraged Enough After Yesterday's Crash?“The significant drops in OI & ELR indicate substantial deleveraging. Many leveraged positions have been liquidated or closed, reducing market risk and volatility” – By @IT_Tech_PL Link👇https://t.co/0VGbLaDIXG pic.twitter.com/MkDGSTT7Ib
— CryptoQuant.com (@cryptoquant_com) August 6, 2024
Bitcoin ELR Falls to Lowest Level Since 2020
Current data of Bitcoin Open Interest (OI) and the Estimated Leverage Ratio (ELR) has decreased drastically. For instance, according to data from August 6, 2024, Bitcoin’s open interest is $14.18 billion, which was $16.74 billion on August 4. Similarly, the ELR is now 0.1758, compared to 0.1990 on August 3.
In the past, the current ELR of 0.1758 suggests a reduction in leveraged positions as it is the lowest since early February 2020. Currently, the Bitcoin OI stands at $14.18 billion which is also the lowest since mid-2021. These are the lowest figures in history, which indicates that many leveraged positions have been closed.
Declines in OI and ELR Indicate Healthier Crypto Market
This considerable reduction in leverage reduces market hazards and volatilities. Fewer leveraged positions mean that the market is not prone to big, sudden swings which could potentially be beneficial for steadying the market. Such stability is however important in this potential recovery if other markets are favorable in this market.
According to CryptoQuant, the highly significant decreases in OI and ELR indicate that the market has gone through its correction phase. This correction can help to pave way for a more stable and probably recovering market in the near future.
