Bitcoin's Leverage Ratio Drops as Price Seesaws Above $29K

Bitcoin's estimated leverage ratio, which measures the use of leverage in the market, has reached its lowest level since December 2021, indicating low price volatility in the future. The ratio has halved since October, suggesting a decline in the degree of leverage employed in the market to magnify returns. A dwindling ratio means less sensitivity of the spot market to the derivatives market activity, making episodes of liquidations-induced wild price swings rare going forward. The continued decline in the leverage ratio suggests that bitcoin's year-to-date rally of 75% has been spot market driven.