> For the complete documentation index, see [llms.txt](https://userguide.cryptoquant.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://userguide.cryptoquant.com/cryptoquant-metrics/market/estimated-leverage-ratio.md).

# Estimated Leverage Ratio

## Definition

Estimated Leverage Ratio (ELR) is defined as the ratio of open interest divided by the reserve of an exchange.

$$
\text{Estimated Leverage Ratio} = \frac{\text{Open Interest}}{\text{Amount of Reserve}}
$$

## Interpretation

Estimated Leverage Ratio indicates how much leverage is used by users on average. 

ELR for a derivative exchange tells us how much leverage is used by users on average. This information measures traders' sentiment whether they take a high risk or low risk.

### By value itself <a href="#interpretation" id="interpretation"></a>

It could be interpreted as the degree of leverage of the market

* **High**: **Over Leveraged Market+ Possible Volatility**

* **Low**: **Low Leveraged Market**

### By examining trend <a href="#indicating-selling-or-buying-pressure" id="indicating-selling-or-buying-pressure"></a>

It shows the sentiment or tendency of total investors' urge to use leverage.

* **Increasing trend: Holding More Leverage**

  Increasing in values indicates more investors are taking high leverage risk in the derivatives trade.&#x20;

  Also, if ELR value is high compared to the last couple of days, it indicates traders are quite confident in their positions.&#x20;
* **Decreasing trend**: **Taking off Leverage**

  Decreasing in values indicates more investors are taking off leverage risk in the derivatives trade.&#x20;

  Also, if ELR value is low compared to the last couple of days, it indicates traders are changing their views or finishing their positions.&#x20;

## Link to Our Data

* [Estimated Leverage Ratio in CryptoQuant Live Chart](https://cryptoquant.com/asset/btc/chart/market-indicator/estimated-leverage-ratio?exchange=all_exchange\&window=DAY\&sma=0\&ema=0\&priceScale=linear\&metricScale=linear\&chartStyle=line)
* [Estimated Leverage Ratio in CryptoQuant Data API docs](https://cryptoquant.com/docs/#operation/getEstimatedLeverageRatio)


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