Alphractal has raised concerns about current Bitcoin market conditions, citing excessive leverage as a potential warning sign for traders.
Leverage Indicator Analysis
According to the firm's latest analysis, the Leveraged Traders Sentiment indicator shows that the number of traders with exposure to leveraged positions is increasing, which could trigger mass liquidations.
Historical Perspective
Historically, when leverage reached high levels, Bitcoin faced significant declines due to long squeezes, according to the analytics firm. Alphractal notes that extreme peaks in leverage occasionally mark local bottoms and signal seller exhaustion, but the dominant possibility remains liquidation of long positions. Such events can lead to sudden and unexpected price movements, adding volatility to the market.
Decline in Altcoin Trading Volume
In addition to Bitcoin’s leverage concerns, Alphractal also observed a decline in altcoin trading volume. Altcoins’ total volume recently reached the same level as in 2021 before starting to decline, suggesting waning public and institutional interest. Altcoin volume is often correlated with price action and is typically higher during bullish periods. While a drop in volume is not necessarily an indication of the end of a bull cycle, Alphractal notes that a similar pattern occurred in late 2021.
Alphractal's analysis highlights the importance of caution for traders amid the current unstable market conditions for Bitcoin and altcoins.
