Traders are once again cranking up leverage, even as Bitcoin extends its sideways trend and broader crypto market risks persist.
The top crypto has continued to trade between $62,000 and $71,000 since February 6, with no meaningful breakout attempts. Still, investors are piling in, increasing leverage, and hoping for a breakout rally.
“The increase in retail activity signals growing speculation and leverage buildup that frequently comes before volatile crypto movements,” Nick Ruck, Director of LVRG Research, told Decrypt.
The metric measures the gap between the derivatives and spot price. An increased gap suggests futures are trading above spot prices, signalling speculative appetite is returning to the market and traders are increasingly willing to pay a premium for long exposure.
That’s backed by aggregated funding rates rising after February 13, indicating long-position speculators are becoming more dominant. Both metrics reveal a shift that points to a market gradually regaining its risk-on footing after weeks of uncertainty.
Options markets tell a similar story, but hint at a more cautious slant.
“We expect short-term potential for a leverage-driven rally and short squeezes, especially if broader risk assets hold steady,” Ruck said.
“Retail typically enters late and suffers the most on unwinds,” the LVRG expert explained, suggesting that “this setup may mark a near-term bottom, but only after the inevitable over-leveraged shakeout occurs.”
Though current market sentiment appears positive, it has yet to be “supported by sufficient trading volume,” according to Ryan Yoon, senior analyst at Seoul-based Tiger Research.
“This disconnect creates a high-risk environment where any sudden downside could lead to a final, mass surrender of interest,” Yoon told Decrypt.
With investors at their breaking point, another forced liquidation could extinguish remaining hope entirely, leading to a “total exodus from the market,” the Tiger Research analyst said. “We are at a critical juncture where the line between a healthy recovery and complete investor apathy is becoming dangerously thin.”
