Bitcoin (BTC) has surged 70% this year, reaching nine-month highs of over $29,000. Despite the sharp rally, the overall use of leverage remains muted, indicating a low risk of "liquidations-induced" wild price swings. Liquidations refer to the forced closure of bullish long and bearish short positions in leveraged perpetual futures markets. When the degree of leverage in the market is high, short liquidations tend to exacerbate bullish moves, leading to a short squeeze. Similarly, long liquidations exacerbate bearish moves, leading to a long squeeze. However, the ratio between the dollar value locked in perpetual futures and the cryptocurrency's market capitalization has been dropping, signaling low odds of a liquidations cascade. The ratio has stayed low despite recent price consolidation, a sign of low investor risk appetite. Meanwhile, Bitcoin has been locked in a narrow range of $29,000 to $27,000 since March 21.

(By Omkar Godbole)