As the market continues to show signs of bullish momentum, there is growing concern that long positions may be getting too crowded. This could potentially lead to a price pullback that triggers overleveraged bulls to close their positions, further exacerbating downside pressures in the market.
Historically, leverage washouts have been a common occurrence in previous bull markets. These sudden liquidations of overleveraged positions have often resulted in double-digit percentage price drops, catching many traders off guard.
It’s important for traders and investors to be aware of the risks associated with overleveraging, as it can amplify both gains and losses in the market. By keeping leverage in check and practicing risk management, traders can mitigate the impact of potential market downturns.
