Glassnode reported that leverage levels remain high despite the pullback in altcoin prices, and that a deeper decline could put numerous long positions at risk.
According to an analysis shared by the on-chain data firm on October 19, prices fell after leverage peaked early this month, but leverage concentration in large- and mid-cap altcoins remains a notable risk factor.
More than 40 percent of the large-cap altcoins examined are still near their highest leverage levels of the year. Among mid-cap altcoins, the share of those near their own annual leverage peaks reached its highest level of the year.
Why are long positions at risk as prices fall?
Glassnode’s warning highlights an important point: the assumption that leverage risk has also disappeared after prices pulled back overlooks the fact that leverage indicators remain elevated across a broad swath of the market.
Long positions opened in anticipation of a rally are vulnerable to moves in the opposite direction. According to the analysis, a deeper decline could put a significant portion of these positions under pressure.
While the sharpening of weekend sell-offs in altcoins that we previously reported on showed weakness on the price front, the new assessment reveals that leverage-related risk persists despite the pullback.
Not investment advice.