Cryptocurrency traders are ramping up leverage across exchanges once again, with the amount of borrowed funds getting close to record highs. This comes as alternative coins rallied, led by Ripple’s XRP cryptocurrency.
Data from metrics provider CryptoCompare shows total leverage across major exchanges jumped to $19.5 billion as of Nov. 5, approaching the all-time peak above $20 billion reached in March. Leverage lets traders supersize bets with funds borrowed from exchanges.
The rising leverage coincides with a resurgence among altcoins, which lagged behind Bitcoin for much of 2022. XRP, the token of the Ripple payment network, has soared around 45% over the past week. Other gainers include Solana’s SOL, up 17%, and Dogecoin, which rose 12%.
The rallies show traders’ risk appetite remains strong despite recent industry turbulence like the FTX collapse. High leverage also raises the risk of cascading liquidations if prices suddenly swing lower. XRP leapt as Ripple scored a preliminary legal victory against the Securities and Exchange Commission in a long-running case over whether the token is an unregistered security. The ruling lifted some regulatory uncertainty hanging over XRP.
Ripple CEO Brad Garlinghouse cheered the judge’s decision, stating it recognizes limits on the SEC’s authority to regulate crypto. The agency said it continues to believe XRP violates securities laws. The rising altcoin prices also follow a massive sell-off that erased over $200 billion in cryptocurrency market value last week. The drop came amid concerns about contagion from FTX’s failure.
Bitcoin has stabilized around $20,500 but remains down 64% from its record high of nearly $69,000 last November. The total crypto market cap sits below $1 trillion after nearing $3 trillion at its peak.
Ripple is leading an alt-coin rally as leverage ramps up in the cryptocurrency market. The surge in lending demand and positive funding rates is a sign that traders are becoming more bullish on the market, but it is important to be aware of the risks associated with leverage in a volatile market.