In the near to medium term, cryptocurrencies like Bitcoin (BTC) are expected to experience dramatic price fluctuations after weeks of decreased volatility, predicts one analyst, as reported by Cointelegraph.
According to Cointelegraph, due to the extreme leverage and previous low volatility, the current state of cryptocurrency markets might potentially produce “explosive volatility,” according to Arcane Research analyst Vetle Lunde. Lunde noted that while Bitcoin has been stable at roughly $19,000 over the past several weeks, there has been a “leverage bonanza,” or leverage going parabolic in the market for cryptocurrency futures.
Leverage in cryptocurrency trading is the process of making trades with borrowed money in order to increase profits through transactions like perpetual swaps.
As of October 11, Arcane reported that the notional open interest (OI) in Bitcoin perpetual contracts was getting close to 500,000 BTC, signalling a parabolic increase in leverage despite Bitcoin’s flattening volatility.
The Arcane Research analyst remains positive about Bitcoin over the long run, regardless of the short- to the medium-term trend that emerges. In addition to more stable interest rates and inflation, Lunde expressed optimism that the upcoming year will bring “idiosyncratic crypto-related regulatory clarity” to the United States.
(With insights from Cointelegraph)