BTC’s Estimated Leverage Ratio drops sharply to -0.25
This marks the lowest level since China’s mining ban in 2021
Traders are reducing risk by closing leveraged positions
Bitcoin’s Estimated Leverage Ratio (ELR) has seen a sharp drop, plunging to -0.25 in just three days, according to CryptoQuant analyst Darkfost. This marks the lowest level for the metric since China’s sweeping crackdown on crypto mining in 2021. The drop reflects a significant decline in open interest and suggests that traders are actively reducing their exposure to leveraged positions.
Traders Respond to Risky Market Conditions
The decline in the Bitcoin leverage ratio often signals rising caution in the market. Leveraged positions allow traders to amplify their gains but also increase the risk of liquidation during volatile price swings. A sudden dip like this suggests that market participants are pulling back to avoid such risks, possibly anticipating turbulent conditions ahead.
The last time the leverage ratio dropped this low was during a time of major disruption—China’s 2021 crypto ban—which caused a wide-ranging market selloff. Now, the current ELR movement indicates a similar sentiment of risk aversion, though the specific cause remains uncertain.
CryptoQuant analyst Darkfost noted that BTC’s Estimated Leverage Ratio (ELR) dropped sharply to -0.25 in three days — the lowest since China’s 2021 mining ban. The sharp decline in ELR indicates a rapid reduction in leveraged positions and open interest, suggesting some traders…
— Wu Blockchain (@WuBlockchain) June 23, 2025
Lower Leverage May Stabilize BTC Price
While a drop in leverage might seem negative at first, it can also bring stability. With fewer leveraged trades, there’s a reduced risk of sudden liquidations that could drag prices down rapidly. This might provide a healthier foundation for Bitcoin to find stable support before making its next major move.
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