CryptoQuant CEO: Stay cautious, BTC-USDT perp market is overleveraged—2.7x higher than early this year

CryptoQuant’s CEO and co-founder Kim Young Ju revealed in an X post that the BTC/USDT perpetual market was over-leveraged. According to Young Ju, the current perpetual trading leverage is 2.7x more than at the beginning of the year. The CryptoQuant CEO also warned traders of possible risks their positions could have once the pair’s price unravels. 

The CryptoQuant also released a detailed chart of the pair’s leverage since 2021, showing that the current level is the highest since mid-2021. In August 2021, the pair’s Open Interest (OI) to USDT reserve ratio was about 0.3. As of November 12 this year, the pair’s OI to USDT reserve ratio is over 0.5. The increase since August 2021 is now over 60%.

Another crypto analyst in the comments explained the meaning of Young Ju’s overleveraged claims. The user disclosed that the increased leverage means more traders are borrowing money to trade perpetual futures for the BTC/USDT pair. 

The analyst revealed that the aggressive borrowing witnessed could lead to market volatility. Prices, in turn, could go extremely high, extremely low, or fluctuate between the two. The money reportedly borrowed for BTC trading hit over $31 billion, the highest ever borrowed. The user reiterated that in the past, such levels encouraged about a -20% drop, urging traders to take care.

CryptoQuant CEO reveals perpetual funding hit new highs

BTC perp funding rate at 0.05%, which implies 50%+ per annum funding cost on long positions. Together with BTC near 90,000 and +10% move overnight without any equity rally — I admit I'm worried. pic.twitter.com/AMMCXMnu9F

— Daniel Yan (@_D_Y_A_N) November 12, 2024

The crypto derivatives market is showing a bullish sentiment, with perpetual funding hitting new highs since the beginning of the current bull run. Kryptanium Capital’s founder and CEO, Daniel Yan, tweeted on November 12 that the BTC perp funding rate had spiked to 0.05%. According to Yan, the level would allow 50%+ per annum funding on long positions. However, despite the spike, the Kryptainium CEO expressed worry about the current uptrend and the lack of equity rally.  

Singaporean digital assets firm QCP Capital shared sentiments similar to those of Young Ju, saying that the market was at risk of leverage washouts and pullbacks. The firm reportedly highlighted how BTC had crossed several resistance levels. In a Telegram broadcast, the firm’s representatives also explained that the current perpetual funding had been elevated significantly while basis yields hit a seven-month high.  

QCP Capital insisted that the current BTC bull run may create crowding on long positions, leading to overleveraging. The firm was also worried about bulls capitulating their longs, causing a downturn in market sentiment. The company insisted that leverage washouts have been common in previous bull markets. 

BTC may continue on an uptrend

And no correction in sight. Not much resistance📈

— kbar (@kbar_var) November 11, 2024

Some believe that the current uptrend may continue, considering that BTC has not faced much resistance since the bull market started. After news of Trump’s victory in the November 5 election, the coin began its uptrend. The crypto space showed optimism for better market conditions for digital assets with Trump in office. 

Bitcoin has hit a new all-time high, crossing $92,000 today and up over 4% in the past 24 hours. While Ethereum has not hit a new all-time high, its price has improved compared to its yearly performance. Other altcoins, including memecoin, have followed suit during the bull run. 

According to K33 Research Head of Research Vetle Lunde, the options market hopes for continued momentum. Lunde revealed to CNBC that futures premiums had shot up significantly. The K33 Research head of research gave an example of BTC and ETH premiums, which sat at 7% before the elections and are now hovering over 14%.