Emily Walker
On January 12, Maartunn, an on-chain analyst from CryptoQuant, issued an important warning via X. He highlighted a concerning trend: Bitcoin’s “Estimated Leverage Ratio” (ELR) has increased significantly on four major trading platforms—Gate.io, Bybit, HTX Global, and Deribit. The ELR, which is calculated by dividing the open interest in Bitcoin futures by the reserves held on exchanges, has spiked, indicating a potentially “overheated futures market” or “unusually low exchange reserves,” according to Maartunn.
Important Insights for Bitcoin Investors
Gate.io has seen the most alarming rise in its ELR, primarily due to a substantial increase in open interest, which surged from about $1.5 billion to $6.4 billion in just a month. Maartunn noted that Gate.io has exhibited high ELR values frequently between November 2021 and October 2022, during both Bitcoin’s peak and the subsequent bear market. However, the recent uptick in ELR suggests renewed risk-taking on this platform.
Bybit also deserves attention, maintaining an ELR above 1 for over two years. Maartunn referenced “Bybit-apes,” a term for traders who often use high leverage, making the platform susceptible to drastic price fluctuations in Bitcoin.
HTX Global, which was previously known as Huobi, has recorded a rapid increase in open interest from around $150 million to $3 billion in under a year. While this growth indicates rising popularity, it hasn’t been matched by a corresponding increase in exchange reserves, which Maartunn found “odd.” He cautioned that the disparity may signal a potential risk if reserves do not align with the surge in leverage, whether in Bitcoin or stablecoins.
Deribit, the fourth exchange analyzed, has also shown an uptick in ELR. However, Maartunn believes this may be misleading due to a suspected internal address skewing the data. Although Deribit is known for its strong options market, it may not reflect the same level of high-leverage trading as seen in Gate.io, Bybit, or HTX Global.
Maartunn emphasized that his analysis aims to inform rather than induce fear. “This isn’t about spreading FUD—I’m sharing data for you to consider. Use this information for your own decision-making,” he stated, recalling the lessons learned from the collapse of FTX.
He recommends keeping minimal funds on exchanges to mitigate counterparty risks and urges caution with leveraged trades, particularly when ELR metrics are elevated. Additionally, he suggests exchanges like Binance, BitMEX, Kraken, Bitfinex, and OKX, which currently present more favorable ELR figures.
At the time of writing, Bitcoin’s price is $90,768.