Leverage, not the spot market, fueled a crypto market July rally that restored $240 billion in market capitalization. While leverage boosts returns, it exposes traders to forced liquidations by exchanges it they can’t meet margin shortages. Therefore, derivatives-led rallies like July’s often inject volatility into the market. That said, overall leverage still remains low compared with early 2021.
Source: https://www.coindesk.com/markets/2022/08/12/crypto-derivative-trading-volume-rose-for-first-time-in-4-months-as-market-rallied-in-july/?utm_medium=referral&utm_source=rss&utm_campaign=headlines