A spike in Bitcoin (BTC) leverage levels could be a sign that the crypto market is overheating, according to analysis firm Into the Block.
The company's head of research, Lucas Automurro, said in a new analysis that funding rates have reached their highest level since 2021.
“Binance and Bybit funding rates yesterday reached levels of 0.06% and 0.09%, paid every 8 hours. These fees amount to an annualized rate of 93% and 168% for going long Bitcoin. It comes down to costs. Abnormally high funding rates indicate that the market is heavily skewed to the long side.”
Otumuro said the overly bullish situation in derivatives should be a “warning sign” for the crypto market.
“The crypto market is showing signs of overheating. The average 90-day return of the top 20 crypto assets (excluding stablecoins) listed on IntoTheBlock is 103%. Companies that performed well recovered “only 28%.” ”
Additionally, analysts note that the total amount of debt issued through Aave (AAVE) v3 on Ethereum (ETH) has more than doubled this year. According to Otumuro, around $700 million worth of wrapped Bitcoin (WBTC) has flowed into Aave this year as well.
At the time of writing, Bitcoin is trading at $68,462. The top crypto asset by market capitalization has fallen nearly 4% in the past 24 hours.
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