Bitcoin [BTC] recently smashed through its psychological resistance, entering the $60,000 territory. Nonetheless, this achievement has introduced substantial strain, with certain significant investors cashing out and the Estimated Leverage Ratio of Bitcoin hitting its peak for the year.
Bitcoin’s leverage reaches its yearly peak
As per figures from CryptoQuant, Bitcoin’s Estimated Leverage Ratio jumped to 0.216, marking the highest level witnessed in 2024. This parameter unveils the extent of leverage (borrowed funds) being utilized in Bitcoin trading.
An escalation in leverage usually implies that traders are taking on more exposure to risk. As a result, in case the price of BTC moves in a direction opposite to these leveraged positions, it can trigger extensive liquidations when leveraged positions are forcibly closed, causing sudden price plunges.
Moreover, an uptick in the leverage ratio signals probable price instability. With more leverage entering the market, price fluctuations, whether upwards or downwards, get magnified.
Should BTC continue its ascent alongside the growing leverage, it could usher in an overheated market scenario, where any retracement might lead to significant liquidations.
On the flip side, a sudden price decline could initiate liquidations, resulting in a sharp drop in the value of BTC.
Bitcoin confronts resistance post-price breakthrough
Following a surge of over 4% on 13th September, Bitcoin breached its short-term moving average, trading near $60,543.
However, maintaining this momentum turned out to be a struggle, evident from subsequent trends. Bitcoin witnessed an 0.8% dip in the subsequent trading session, hovering around $60,012.
Presently, BTC has slightly risen, trading around $60,095 at the time of drafting this article. The absence of a robust follow-through suggests that the asset has encountered significant selling pressure, with some investors cashing out profits after the recent uptrend.
Smart money exploits the price surge
Data from CryptoQuant unveiled that Bitcoin whale addresses capitalized on the recent price upsurge to secure profits. Upon BTC breaking the $60,000 mark, the profits realized by these whales surged.
Whale addresses reportedly cashed in profits exceeding $50 million, seizing the opportunity presented by the price hike.
This whale activity underscores the strain on Bitcoin at this price level as substantial investors lock in their gains, potentially triggering short-term price fluctuations.