Crypto Volatility Risks Rise with Record High Leverage in Altcoins, Analysts Warn

Analysts are warning that high leverage in cryptocurrencies could lead to bigger price swings. This comes as open interest in Ethereum (ETH) options hits a record $16 billion, and total open interest across other altcoins reaches $47 billion.

Setups like this often amplify volatility, especially when prices approach resistance levels. Market experts are keeping a close eye on leverage in crypto as prices climbed on Thursday. This followed softer U.S. inflation data, which fueled investor optimism about renewed demand for exchange-traded funds (ETFs) and better odds for interest rate cuts.

Timothy Misir, head of research at BRN, explained that major economic signals and inflows from Wall Street have sparked a broad rally in risky assets. In a note shared with The Block, he pointed out that Bitcoin (BTC) has regained strength above $120,000, while Ether crossed $4,700. Demand for ETFs has been a key driver behind this upward movement. U.S. spot Ether ETFs recorded $729 million in net inflows on Wednesday, their second-largest daily total ever. This helped push ETH toward its all-time high.

Bitcoin funds saw smaller inflows in comparison. Misir noted that the price action after the inflation report confirms that easier policies and steady inflows are the main pillars of the rally. However, he cautioned that record leverage in altcoins, paired with low implied volatility, has historically led to choppy trading.

He added that open interest in top altcoins has now reached a record high after the recent price surge, fueled by a significant wave of speculative capital. With implied volatility remaining low, this situation “often precedes realized volatility expansion” into resistance areas, which could trigger sharp market swings. Blockchain analytics firm Glassnode supported this view, showing open interest across major altcoins at an all-time high of about $47 billion. This leverage buildup can intensify both rallies and pullbacks.

Glassnode also highlighted ETH options open interest near year-to-date highs of $16.1 billion, with spot prices close to record levels.

The Block’s data dashboard confirms this elevated ETH options open interest, indicating heavy trader positioning. At the same time, options tenors are at multi-year lows, with modest skews and no signs of panic hedging yet. This leaves room for a sudden volatility spike if prices fail to break through resistance, according to BRN’s analysis.

Bitcoin Outlook

For Bitcoin, Misir said the short-term holder cost basis around $120,000 is a crucial level. This follows a brief dip last week when BTC fell to $112,000.

But BRN’s analysis found that “most investors who recently bought Bitcoin were confident enough to hold onto their assets despite the price drop.”

He believes that if prices consolidate around this short-term holder cost basis, it could build bullish momentum for another push above BTC’s all-time high of $124,128.

“If price can break above, the next target could be $144,000,” he said.

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