Bitcoin Leverage Explodes to Yearly Highs—But Here’s What Could Tank BTC’s Rally

Crypto traders are piling into leveraged Bitcoin positions like never before this year—but the party could end in tears.

Leverage cuts both ways

While sky-high leverage fuels explosive rallies, it also sets the stage for violent liquidations. One big whale dump or regulatory crackdown could trigger a cascade of margin calls.

The hidden risks Wall Street ignores

Institutional players keep chanting 'digital gold' while quietly enabling casino-like conditions. Sound familiar? *cough* 2008 *cough*.

BTC's make-or-break moment

The market's walking a tightrope between euphoria and recklessness. Whether this ends in new ATHs or a brutal squeeze depends on who blinks first—the bulls or the margin clerks.

Bitcoin leverage tops the yearly range

According to CryptoQuant, BTC’s Estimated Leverage Ratio across all exchanges jumped to 0.27, the highest reading in the past 12 months.

Source: CryptoQuant

While this showed an aggressive risk appetite and a bullish outlook amongst traders, it also has a caveat: Liquidation cascades. With high leverage or borrowed money in trading, wild price swings can wipe out positions in a flash. 

Is the market overheated? Not yet!

Despite the high leverage, the market was not frothy or overheated enough to warrant panic, per Funding Rate data.

CoinGlass data showed BTC’s Funding Rate hovering around 2% APR, a far cry from the overheated 50%+ levels seen in late 2024.

Source: CoinGlass

In short, the current leverage levels are still healthy for BTC to push higher, assuming other factors remain positive. 

Meanwhile, in case of a liquidation hunt, the main key levels to watch in the near term were $103K and $111K. These were major liquidity pools and potential price magnets.

In fact, about $8 billion worth of Leveraged bulls around $103K could be at risk if the brief correction taps the level. 

Source: CoinGlass

Profit pressure builds

Another potential sell-side pressure for bulls to consider is the high level of Unrealized Profit at the current BTC value.

According to Glassnode, the current profitability rivaled Q4 2024 levels -A risk factor if holders begin locking gains. 

“The total unrealized profit stands at an estimated $1.2T, underscoring the substantial value appreciation experienced by Bitcoin investors, but also the incentive for potential sell-side pressure that may emerge if sentiment shifts.”

Source: Glassnode

Other additional short-term macro headwinds include the TRUMP tariff deadline on the 9th of July and the recently passed reconciliation bill. 

Notably, Coinbase analysts projected that the U.S. Treasury could borrow money after the bill raised the U.S. debt limit to $5 trillion. 

Such borrowing WOULD drain the U.S. dollar liquidity and negatively impact risk-on assets like BTC.

With the current ‘greed level’ in the market, this soured sentiment could accelerate the profit-taking scenario shared by Glassnode.