As Bitcoin currently faces a downturn and now seeing a recovery suggesting a preparation for its next bull run, market participants appears to be analyzing trends in exchange leverage and liquidity. Particularly, CryptoQuant has pointed out that leverage ratios on centralized exchanges have become a focal point, offering insights into the potential risks and opportunities shaping the crypto market.

The platform’s recent data highlights the importance of assessing these ratios to gauge the financial stability of exchanges and the impact on trading dynamics.

Leverage Trends And Exchange Stability

A detailed analysis revealed that Binance maintains strong reserves relative to its open interest, signaling a strong ability to manage market volatility. In contrast, smaller exchanges like Gate.io and Bybit exhibit higher leverage ratios, raising questions about their capacity to withstand liquidity crunches.

According to CryptoQuant, monitoring these metrics has become even more “critical” in light of past events, such as the collapse of FTX in November 2024, which was triggered by insufficient reserves against high open interest.

CryptoQuant’s latest findings further highlight the varying leverage strategies employed by major cryptocurrency exchanges. Binance emerged as a leader in maintaining a stable leverage ratio while expanding its Bitcoin open interest from $4.45 billion in December 2023 to $11.64 billion in December 2024.

Despite this growth, Binance’s Bitcoin, Ethereum, and USDT reserves have consistently exceeded its open interest, ensuring liquidity and stability even during volatile market conditions. The exchange’s leverage ratio, which rose modestly from 12.8 to 13.5 over the past year, remains the lowest among its peers.

Conversely, exchanges like Gate.io, Bybit, and Deribit exhibit significantly higher leverage ratios of 106, 86, and 32, respectively. CryptoQuant wrote:

These figures show their Bitcoin open interest exceeds or approaches their reserves, with similar patterns observed for Ethereum.

Coinbase Premium: A Key Indicator For Bitcoin Traders

Beyond leverage ratios, another crucial metric shaping Bitcoin market sentiment is the Coinbase Premium. This indicator, which tracks the price difference between Bitcoin on Coinbase and other exchanges, is a barometer for institutional demand and market trends.

A CryptoQuant analyst named BQYoutube suggested that traders adopt a cautious approach based on Coinbase Premium signals: When the premium is negative, it may be wise to stay on the sidelines.

However, a positive premium often signals the return of strong demand, offering a strategic entry point for traders looking to ride major market trends.

According to the latest data, this metric currently sits on the negative side, suggesting to stay on the sidelines. BQYoutube added:

You might miss few small trends with this approach but at least you can ride all the big trends and avoid losses in dips or downtrends.

Featured image created with DALL-E, Chart from TradingVie