The cryptocurrency market is currently experiencing a surge fueled by high leverage, but experts warn of significant risks ahead. According to CryptoQuant data, the market’s open interest of Bitcoin has reached an alarming $18 billion. In this, the majority of positions are long and highly leveraged. This means that many traders are borrowing large amounts to maximize their profits. This situation could lead Bitcoin to major price fluctuations.

Rising Leverage in Bitcoin Market Increases Chances of Price Freefall

CryptoQuant analysts pointed out that when leverage gets to such levels, the market becomes very sensitive to any fluctuations. For instance, they comment on the recent price cut 2 days ago from $64,000 to $59,000 on the grounds of high leverage. But now, more than $1.5 billion in leveraged positions are driving the current rally, there are indications that the market may once again correct sharply.

The principle behind this is simple: the increase in the number of leveraged positions filled leads to the enhancement of chances of liquidation. If the price falls by a decimal point and more, these positions can be closed forcibly and this leads to a free fall of the price. This in turn triggers a chain of events that could lead to more selling and therefore the downward cycle continues.

Traders Urged to Monitor Positions Closely Amid Ongoing Crypto Volatility

Given this, traders are encouraged to be cautious as the market keeps on recording impressive growth. Although high leverage means high profit can be made, it also means very high risk can be incurred. The CryptoQuant caution means that there is still a great deal of volatility in the cryptocurrency market and people should be ready for sharp changes.

So long as the market continues to remain volatile, traders need to keep abreast with developments and their positions. They should be more cautious, especially if they have a high level of leverage because a market shift is likely to be unfavorable. It is suggested to be careful and do not overdo with leverage during this volatile period of BTC.