Surge in Leverage-Backed ETH Trades
According to an analysis by CryptoQuant analyst Joao Wedson, there has been a surge in leverage-backed ETH trades on the derivatives exchange Deribit. This suggests that there may be looming price swings in the ethereum market.
The Leverage Estimated Ratio indicator (ELR) measures the average amount of leverage traders use to execute trades on a cryptocurrency exchange. When the ELR increases, it means traders are using a significant amount of leverage, which can amplify both profits and losses as well as occasion price swings. Conversely, a low ELR suggests less volatile price movements.
Impact on Market Volatility
Deribit has been identified as the “epicenter of highly leveraged ethereum,” and as such, the growing ELR on the exchange might impact the general market. Open interest continues to grow daily, signaling a steady increase in demand for leveraged positions. This indicates a higher risk when engaging in trades on this platform.
Growing Volatility in the Spot Market
Assessing volatility indicators on ETH’s spot market confirms Wedson’s position. The past three weeks have seen a widening gap between the upper and lower bands of ETH’s Bollinger Bands (BB) indicator, signaling increased volatility in the market. Moreover, the coin’s Bollinger Bandwidth (BBW) has continuously trended upward, confirming the volatile nature of the current ETH market. Furthermore, ETH’s Average True Range (ATR) and Chaikin Volatility have also been showing signs of increased volatility. These indicators all suggest that ETH is experiencing significant price movements and potential volatility.
Overall, this analysis indicates that ethereum is experiencing a surge in leverage-backed trades, which may lead to significant price swings. Traders should exercise caution when trading on high-leverage platforms such as Deribit due to the potential for increased risk and volatility.
### News source: eng.ambcrypto.com