Arab Chain
The decline in the leverage ratio reduces correction risks and supports Bitcoin’s stability at high price levels.
The latest data indicates that the leverage ratio on the platforms is lower than its recent peak of over 0.27 in late July and early August. There was a sharp decline in early August from high levels to around 0.25, followed by a slight recovery. The period from May to late July saw a parallel rise in both the price and the leverage ratio, reflecting the entry of new traders with larger positions. The recent sharp decline in leverage, while the price did not fall as sharply, suggests that position closings or risk reduction occurred after the uptrend. This decline in leverage may be the result of liquidating high-risk positions or traders exiting the market after sharp volatility. The low leverage ratio, while the price remains strong (near $119,000), is a relatively positive sign, as it suggests that the recent upswing is supported by actual liquidity rather than excessive speculation. The continued decline of the indicator may reduce the likelihood of a severe correction, but if it begins to rise rapidly alongside the price, the risk of a correction may increase. If leverage remains at moderate or low levels while the price remains stable, this could provide a stable base for a new uptrend. An ELR holding between 0.24–0.25, accompanied by a gradual price break above 120K, could indicate a spot-supported upside and a possible extension toward the July highs, with moderate funding and slowly rising OI (no surge). Conversely, a sudden jump in ELR above 0.27 before or during a test of 120–124K would signal a high liquidation risk and the potential for a downside “shakeout.” This risk stems from the combination of high leverage, elevated funding, and weak price divergence. This suggests that the market is currently less volatile than it was at the July peak because some of the leverage has already been released.