In an analysis done by Leverage Trading, Bitcoin leverage ratios were compared across major crypto exchanges.
These are surprising insights they found:
- Bybit currently has the highest Bitcoin leverage ratio of all exchanges, with a ratio of 2.76.
- This means that the average user on Bybit is taking more than 10 (1049%) times the risk compared to the average user on Binance, which has a leverage ratio of 0.24.
- Gate.io is also considered to be in a high-risk zone with a leverage ratio of 1.84, which is significantly higher than most exchanges, except for Bybit.
- OKX has a leverage ratio of 0.32, which is also higher than most exchanges, but still significantly lower than Bybit and Gate.io.
- BitMEX, Huobi Global, Bitfinex, and Kraken all have very low leverage ratios, with ratios ranging from 0.01 to 0.14. This indicates that traders on these exchanges are taking significantly less risk compared to traders on Bybit and Gate.io.
- The high leverage ratios on exchanges like Bybit and Gate.io could be dangerous for traders should there be a sudden drop in prices.
- The increasing values of leverage ratios indicate that more investors are taking high-leverage bets in the derivative market as prices increase.
- High leverage ratios also mean that the liquidation price gets closer to the entry price of a position which is what ultimately liquidates a trader should the prices turn around.
- This could lead to unexpected volatility as the price of Bitcoin is testing $30,000, a key level that tends to attract more traders to leverage their bets and also short-term profit-taking which could create a domino effect of liquidations.
Source: CryptoQuant
“The data was obtained today on the 12th of April by dividing the exchange’s open interest by their coin reserve, which shows how much leverage is used by users on average. The leverage ratios on exchanges like Bybit and Gate.io are a cause for concern for traders. High leverage ratios have been prone to cause massive liquidations before as seen on the 30th of March when a total of $130 million was liquidated through leveraged short bets and a similar scenario was seen on the 3rd of March where a total of $62 million was liquidated through leveraged long bets. These high ratios could lead to significant losses for traders across the board should prices start to fall, and we recommend that traders only use leverage when they fully understand the risks involved,” according to Anton Palovaara, Founder and Lead Researcher, Leverage.Trading.
