Share this article
Bitcoin's 'Estimated Leverage Ratio' Hits Lowest Point Since December 2021
The estimated ratio indicates how much leverage is used by traders on average, according to CryptoQuant.
Updated Apr 27, 2023, 3:06 p.m. Published Apr 27, 2023, 7:50 a.m.
A key metric gauging the use of leverage in the bitcoin market continues to slide, signaling low price volatility in the future.
Bitcoin's estimated leverage ratio, calculated by dividing the dollar value locked in the active open perpetual futures contracts by the total number of coins held by derivatives exchanges, fell to 0.195 on Wednesday, reaching the lowest since Dec. 20, 2021, per data tracked by analytics firm CryptoQuant.
STORY CONTINUES BELOW
Don't miss another story.Subscribe to the Crypto Daybook Americas Newsletter today. See all newsletters
Since October the ratio has halved, indicating a sharp decline in the degree of leverage employed in the market to magnify returns.
Other things being equal, a dwindling ratio also means less sensitivity of the spot market to the derivatives market activity. In other words, episodes of liquidations-induced wild price swings, the likes of which was seen on Wednesday, may become rare going forward.
Perpetuals are futures contracts with no expiry that use the funding rate mechanism to keep prices tethered to the spot market price. Leverage allows users to open positions worth more than the money or coins deposited at the exchange. The use of leverage exposes traders to liquidations – forced unwinding of bullish long or bearish short positions due to margin shortage. Mass liquidations end up injecting volatility into the market.
A reduced bitcoin price volatility may bring more mainstream participation in the crypto market.
The estimated leverage ratio has been in free fall since Sam Bankman-Fried's FTX went bust in early November. The exchange was known for its perpetual futures product, offering leverage up to 20 times the collateral traders posted.
The continued decline in the leverage ratio suggests that bitcoin's year-to-date rally of 75% has been spot market driven. The popular assumption is that the spot market is a proxy for long-term investors, while derivatives represent institutions and sophisticated traders/speculators.
More For You
KuCoin captured a record share of centralised exchange volume in 2025, with more than $1.25tn traded as its volumes grew faster than the wider crypto market.
What to know:
- KuCoin recorded over $1.25 trillion in total trading volume in 2025, equivalent to an average of roughly $114 billion per month, marking its strongest year on record.
- This performance translated into an all-time high share of centralised exchange volume, as KuCoin’s activity expanded faster than aggregate CEX volumes, which slowed during periods of lower market volatility.
- Spot and derivatives volumes were evenly split, each exceeding $500 billion for the year, signalling broad-based usage rather than reliance on a single product line.
- Altcoins accounted for the majority of trading activity, reinforcing KuCoin’s role as a primary liquidity venue beyond BTC and ETH at a time when majors saw more muted turnover.
- Even as overall crypto volumes softened mid-year, KuCoin maintained elevated baseline activity, indicating structurally higher user engagement rather than short-lived volume spikes.
More For You
Asia Morning Briefing: Data shows legacy media took a more balanced view of bitcoin in 2025
Media attention shifted from bitcoin’s environmental footprint to crime and kidnapping in 2025, while overall sentiment remained broadly neutral, according to crypto intelligence platform Perception.
What to know:
- In 2025, mainstream media coverage of Bitcoin became more balanced, with neutral reporting surpassing negative stories.
- The shift in narrative was driven by the exhaustion of earlier critiques rather than increased enthusiasm for Bitcoin.
- AI emerged as the dominant topic in media, overshadowing Bitcoin and driving more significant sentiment swings.
Top Stories
