Leverage on the Rise
The analytics firm IntoTheBlock warns that Bitcoin’s skyrocketing leverage levels could indicate an overheated crypto market. According to Lucas Outumuro, the firm’s research head, funding rates have hit their highest since 2021.
Long Positions Dominate
“Funding rates are abnormally high, suggesting a heavily skewed market towards long positions,” Outumuro explains. “This bullish sentiment should be a warning sign.”
Bullish Indicators
The crypto market has been on a tear, with the top 20 assets (excluding stablecoins) showing an average 90-day return of 103%. Even the worst performer has rallied by 28%.
Debt Surge
Outumuro also highlights the surge in debt issued through Aave on Ethereum. The platform has seen a doubling in the amount of debt this year, with $700 million worth of Wrapped Bitcoin (WBTC) flowing onto the platform.
Bitcoin’s Price Dip
Despite the bullish indicators, Bitcoin’s price has dipped nearly 4% in the past 24 hours, trading at $68,462 at the time of writing.
Caution Advised
Investors are urged to proceed with caution, as the crypto market may be showing signs of overheating. High leverage and bullish sentiment can lead to market volatility and potential losses.
