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Bitcoin Market Leverage and Coinbase Premium: What Recent Data Reveals

As Bitcoin currently faces a downturn and now seeing a recovery suggesting a preparation for its next bull run, market participants appears to be analyzing trends in exchange leverage and liquidity. Particularly, CryptoQuant has pointed out that leverage ratios on centralized exchanges have become a focal point, offering insights into the potential risks and opportunities shaping the crypto market. The platform’s recent data highlights the importance of assessing these ratios to gauge the financial stability of exchanges and the impact on trading dynamics. Related Reading: As Bitcoin Reclaims $100,000, Warning Signs Emerge from Long-Term Investors Leverage Trends And Exchange Stability A detailed analysis revealed that Binance maintains strong reserves relative to its open interest, signaling a strong ability to manage market volatility. In contrast, smaller exchanges like Gate.io and Bybit exhibit higher leverage ratios, raising questions about their capacity to withstand liquidity crunches. According to CryptoQuant, monitoring these metrics has become even more “critical” in light of past events, such as the collapse of FTX in November 2024, which was triggered by insufficient reserves against high open interest. CryptoQuant’s latest findings further highlight the varying leverage strategies employed by major cryptocurrency exchanges. Binance emerged as a leader in maintaining a stable leverage ratio while expanding its Bitcoin open interest from $4.45 billion in December 2023 to $11.64 billion in December 2024. Despite this growth, Binance’s Bitcoin, Ethereum, and USDT reserves have consistently exceeded its open interest, ensuring liquidity and stability even during volatile market conditions. The exchange’s leverage ratio, which rose modestly from 12.8 to 13.5 over the past year, remains the lowest among its peers. Conversely, exchanges like Gate.io, Bybit, and Deribit exhibit significantly higher leverage ratios of 106, 86, and 32, respectively. CryptoQuant wrote: These figures show their Bitcoin open interest exceeds or approaches their reserves, with similar patterns observed for Ethereum. Coinbase Premium: A Key Indicator For Bitcoin Traders Beyond leverage ratios, another crucial metric shaping Bitcoin market sentiment is the Coinbase Premium. This indicator, which tracks the price difference between Bitcoin on Coinbase and other exchanges, is a barometer for institutional demand and market trends. A CryptoQuant analyst named BQYoutube suggested that traders adopt a cautious approach based on Coinbase Premium signals: When the premium is negative, it may be wise to stay on the sidelines. Related Reading: Bitcoin Rally Loses Momentum: Could A Drop To $75,000 Signal The Final Correction? However, a positive premium often signals the return of strong demand, offering a strategic entry point for traders looking to ride major market trends. According to the latest data, this metric currently sits on the negative side, suggesting to stay on the sidelines. BQYoutube added: You might miss few small trends with this approach but at least you can ride all the big trends and avoid losses in dips or downtrends. Featured image created with DALL-E, Chart from TradingVie

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Disclaimer: The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of BitMaden. Every investment and all trading involves risk, so you should always perform your own research prior to making decisions. We do not recommend investing money you cannot afford to lose.

AI Won’t Tell You How to Build a Bomb—Unless You Say It’s a `b0mB`

Anthropic’s Best-of-N jailbreak technique proves how introducing random characters in a prompt is often enough to successfully bypass AI restrictions. NewsBTC

Bitcoin Demand On The Rise Again — What’s Happening?

This week was one of two distinct halves for the price of Bitcoin, with the premier cryptocurrency rising to a new all-time high and dropping by about 13% a few days later. On Friday, December 20, the BTC price dropped to as low as $92,000. This abrupt Bitcoin price decline came following the US Federal Reserve’s rate cut, which also pushed other financial markets to the red. However, it is worth mentioning that the premier cryptocurrency is beginning to show signs of recovery, currently hovering around $97,000. Can Growing Demand Push BTC Price Back Above $100,000? In a recent December 20 report, market analytics platform CryptoQuant revealed an interesting on-chain development with the Bitcoin supply-demand dynamics. According to the blockchain firm, the BTC market seems to be enjoying renewed investor interest. Related Reading: How Low Can Dogecoin Go Before It Rebounds? Expert Forecasts The relevant indicator here is the Total OTC Desk Balance, which tracks the amount of Bitcoin held in addresses associated with Over-The-Counter (OTC) desks. This metric provides an insight into the supply of BTC readily to large investors and institutional players. According to data from CryptoQuant, the OTC desks are witnessing their largest monthly inventory decline of 2024, declining by over 26,000 BTC so far in December. This decline has been even more significant in the past 30 days, with the balance dropping by 40,000 BTC since November 20. This decline in the Total OTC Desk Balance is a bullish indicator, which reflects the soaring demand for Bitcoin and the concurrently shrinking supply. Typically, the contracting BTC supply on the open market could set the stage for a period of significant price appreciation. CryptoQuant noted that the price of Bitcoin rallied from $40,000 to around $74,000 in the 2024 first quarter after demand growth caused the Over-The-Counter desks’ inventories to fall. According to the market intelligence, the OTC desk’s inventory is beginning to near the levels seen during the first-quarter rally. Data from CryptoQuant shows that Bitcoin’s apparent demand is currently growing at a monthly rate of 228,000 BTC after entering the expansion territory in late September. At the same time, the balance of accumulation addresses is swelling at a record-high rate of 495,000 BTC per month. Bitcoin Price At A Glance As of this writing, the price of Bitcoin stands at around $97,655, reflecting a 0.1% decline in the past 24 hours. The premier cryptocurrency is down by nearly 4% on the weekly timeframe, according to data from CoinGecko. Related Reading: Dogecoin Price And Its Weekly Golden Cross: Why The Crash To $0.31 Remains Natural Featured image created by DALL-E, chart from TradingView NewsBTC