Have you ever wondered why Bitcoin can drop sharply even when the market is full of good news? It's not because of bad news, but due to stress pressure in the market. The ELR (Estimated Leverage Ratio) is a measure of this pressure.
ELR is calculated by Open Interest divided by Exchange Reserves, telling us the leverage ratio being used compared to the actual number of coins on the exchange. A low ELR allows the market to grow from Spot buying, stabilizing and making it hard to collapse. Conversely, a high ELR causes the market to be dominated by Futures contracts, which is dangerous as it creates a chain of collapses.
When the ELR peaks, the market is like a pumped balloon; a small amount of Spot selling can trigger a chain collapse. This causes prices to drop sharply and creates selling pressure, leading to further declines. Therefore, when ELR is high, avoid FOMO Long and wait for ELR to decrease again to be safe. Be cautious of sudden collapses in the market, and always maintain reasonable risk management when investing.
⭐️ Register for a Binance account to receive 20% cashback on Spot, Futures, Margin trading fees permanently:
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ELR is calculated by Open Interest divided by Exchange Reserves, telling us the leverage ratio being used compared to the actual number of coins on the exchange. A low ELR allows the market to grow from Spot buying, stabilizing and making it hard to collapse. Conversely, a high ELR causes the market to be dominated by Futures contracts, which is dangerous as it creates a chain of collapses.
When the ELR peaks, the market is like a pumped balloon; a small amount of Spot selling can trigger a chain collapse. This causes prices to drop sharply and creates selling pressure, leading to further declines. Therefore, when ELR is high, avoid FOMO Long and wait for ELR to decrease again to be safe. Be cautious of sudden collapses in the market, and always maintain reasonable risk management when investing.
⭐️ Register for a Binance account to receive 20% cashback on Spot, Futures, Margin trading fees permanently:
➡️ Cashback link: https://accounts.binance.com/register?ref=KO2C41E8
- Referral code: KO2C41E8
