The skyrocketing level of leverage on Bitcoin (BTC) could suggest the crypto market is overheated, according to the analytics firm IntoTheBlock.

Lucas Outumuro, head of research at the firm, says in a new analysis that funding rates have reached their highest levels since 2021.

“Funding rates on Binance and Bybit reached levels of 0.06% and 0.09% yesterday, paid every 8 hours. These fees translate to an annualized cost of 93% and 168% in order to go long Bitcoin. The abnormally high funding rates are indicative of a market that skews very heavily on the long side.”

Outumuro says the overly bullish derivatives picture should be a “warning sign” for the crypto market.

“The crypto market is showing signs of being overheated. The average 90-day return for the top 20 crypto-assets (excluding stablecoins) listed on IntoTheBlock is 103%. The worst performer of this top 20 has rallied ‘only 28%.’”

Additionally, the analyst notes that the aggregate amount of debt issued through Aave (AAVE) v3 on Ethereum (ETH) has more than doubled this year. Approximately $700 million worth of Wrapped Bitcoin (WBTC) has flowed onto Aave this year as well, according to Outumuro.

Bitcoin is trading at $68,462 at time of writing. The top-ranked crypto asset by market cap is down nearly 4% in the past 24 hours.

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