A high level of leverage on Bitcoin (BTC) may indicate that the cryptocurrency market is overheated, according to analytics firm IntoTheBlock.
Lucas Otomuro, the company's head of research, says in a new analysis that financing rates have reached their highest levels since 2021.
“Funding rates on Binance and Bybit reached levels of 0.06% and 0.09% yesterday, paid every 8 hours. These fees translate into an annual cost of 93% and 168% for purchasing Bitcoin. Abnormally high funding rates indicate that the market is severely skewed.” On the long side.
Otomuro says the picture of excessively bullish derivatives should be a “warning sign” for the cryptocurrency market.
“The cryptocurrency market is showing signs of overheating. The average 90-day return for the top 20 crypto assets (excluding stablecoins) listed on IntoTheBlock is 103%. The worst performer among the top 20 is only up 28%.
In addition, the analyst notes that the total amount of debt issued through Aave (AAVE) v3 on Ethereum (ETH) has doubled this year. Nearly $700 million in wrapped Bitcoin (WBTC) has flowed into Aave this year as well, according to Outumuro.
Bitcoin is trading at $68,462 at the time of writing. The top-rated crypto assets by market capitalization have fallen by approximately 4% in the past 24 hours.
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