The recent downturn in Bitcoin’s value is largely linked to high leverage in the market and a lack of momentum among retail investors. Analysts point to a combination of internal market factors contributing to this situation.
How Does Leverage Influence Bitcoin’s Price?
On-chain analyst XBTManager has reported a notable decline in Bitcoin’s cumulative volume difference (CVD), indicating that retail investors’ purchasing power on exchanges is diminishing. Consequently, these investors are not backing price increases, leading to selling at elevated levels, which signifies a drop in demand for Bitcoin.
Is Excessive Leverage a Concern for Investors?
Data from CoinGecko reveals that spot trading volume across major exchanges decreased by 14.8% in the third quarter of 2024. Ki Young Ju, CEO of CryptoQuant, warns that leverage ratios in the Bitcoin-USDT futures market have reached all-time highs. Such excessive leverage can trigger significant price movements, with analyst Axel Adler Jr. cautioning that surpassing 55% leverage could result in widespread liquidations.
Key insights from the current market dynamics include:
- Weak retail demand is contributing to Bitcoin’s price decline.
- High leverage levels pose risks for potential liquidations.
- Memecoins are gaining traction, indicating investor interest.
- Future volatility in Bitcoin’s price remains a concern.
With Bitcoin remaining just above its September lows, the market exhibits signs of instability. Meanwhile, community-driven memecoins are gaining momentum, suggesting new investment opportunities may be on the horizon.