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IntoTheBlock’s lead researcher voices concerns over the crypto market’s overheating. He points to increasing leverage across centralized and decentralized finance arenas.
As Bitcoin’s value slides to $68,000 after reaching an all-time high, IntoTheBlock’s analysts suggest the market may be overheating, raising alarms about a forthcoming downturn.
The crypto market is showing signs of being overheated. An increasing amount of leverage in DeFi and CeFi markets suggests we may soon experience a correction.
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Not only are meme tokens rocketing left to right,… pic.twitter.com/4AvlCiv8gM
— Lucas (@LucasOutumuro) March 15, 2024
Lucas Outumuro, the chief researcher at IntoTheBlock, discussed the rise in leverage within the decentralized (DeFi) and centralized finance (CeFi) sectors. In a recent X post dated March 15, he hinted at an imminent market adjustment.
“The market isn’t just seeing meme tokens skyrocket; there’s also a rapid increase in leverage for major assets. This is clearly reflected in the derivatives market, where the costs of taking long positions are at a peak not seen since 2021,” stated Outumuro.
He observed that funding rates on centralized exchanges are unusually high. Outumuro mentioned that despite ETF flows possibly supporting current spot prices, the aggressive bullish stance in derivatives markets serves as a caution.
The increase in leverage isn’t confined to centralized platforms. It also encompasses DeFi platforms. Outumuro pointed out that the total debt issued on Aave v3 over Ethereum has significantly increased since the start of the year.
Crypto Market Might Drop 20%
Outumuro cautioned about a potential “Great Unwinding” in the crypto market. He predicted a 20% market correction as the system’s leverage levels are recalibrated.
Although the precise timing of this correction is hard to predict, the rising borrowing costs are a clear warning sign for crypto investors, suggesting a need for cautious trading strategies. As of the latest update, Bitcoin’s price stands at $67,819, as per CoinGecko.
