Bitcoin options indicators suggest market leverage is too high, which could trigger a leverage liquidation

A key indicator based on Bitcoin futures and options suggests that the market leverage level is too high, which may trigger a leverage liquidation. In recent weeks, Bitcoin (BTC) has been confined to a narrow trading range, waiting for a breakout. Data tracked by crypto structure and trading solutions company STS Digital shows that the ratio between this year's implied yield basis (i.e., the annualized interest difference between one-month futures prices and spot market prices) and the one-month implied volatility triggered by options has more than doubled to 0.34. Jeff Anderson, senior trader at STS Digital said: "When the implied yield basis is relatively large compared to basic volatility, it may mean that leverage and speculation levels are too high." Excessive bullish speculation often leads to leveraged washouts or forced liquidations due to margin shortages. The so-called long liquidation could lead to sharp price declines.