Bitcoin Under High Leverage and Positive Funding: Can It Hold?

The Estimated Leverage Ratio reflects how much leverage traders are using. It’s calculated by dividing open interest in the derivatives market by the total Bitcoin held on all exchanges. A higher ratio means traders are relying more on borrowed capital than actual holdings—suggesting that current market momentum is driven by leverage rather than real demand.

Currently, the ratio has climbed back to 0.273, a relatively high level compared to the recent correction phase. This indicates a large number of highly leveraged positions in the market. If prices drop suddenly, it could trigger widespread liquidations, leading to a sharp sell-off—especially with positive funding rates encouraging long positions.

In such periods, profits tend to be unstable and short-lived. While this environment offers opportunities for short sellers and futures traders, it also signals increased market risk. The surge in leveraged trading shows that investors are still in a risk-on mode, with overconfidence following Bitcoin's recent breakout. This behavior aligns closely with the so-called "Euphoria Phase" in the classic psychological market cycle.