The Leverage Absorption Ratio (LAR from here on) answers one question: how much leverage is the market carrying relative to how much the price is moving? 🤔

A high LAR means a lot of leverage sitting on a market that isn't moving. It’s like the dynamite from the old ship the science teacher in Lost was holding before… boom. Historically it resolves badly because leverage on a flat market gets flushed one way or the other. A low LAR means the leverage has already left, either through liquidations or through vol expanding so much the open contracts look small next to it.

It's a tool for reading the crowd's posture, not a price target. 🎯

FYI: the data used today starts in January 2024, so every "record," "lowest" and "biggest" means since 2024, not since the dawn of time.

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For seventeen days in August, $BTC ( ▼ 0.05% ) traded in a 3.4% range. A utility stock does that before lunch. Its four-week volatility hit 1.3%, the lowest reading since the data starts in 2024, while roughly $22 billion in open contracts sat on top of it like a large man on a folding chair. 🪑

Then the chair broke. $62.8K to $77.1K in six days. Wait. A guy breaks a folding chair falls down, right? So prices go down, not up? Analogy humor fail. Anyway.

The LAR went from its highest level since 2024 on Aug 11 to the bottom quarter of its range in three weeks. That's the zone where every major Bitcoin bottom since 2024 has printed. When the LAR has been this low or lower, price was higher 90 days later about seven times out of ten, median gain near 8%.

Great. Except…

Every previous trip down here came from a flush: open contracts collapsing, funding going negative, people getting carried out. This one came from the opposite direction. Open contracts (in BTC terms) fell 11% during a 21% rally. Shorts just stopped being short.

So the number says bottom and the mechanics say short squeeze that ran out of shorts. There's no precedent in the data for that combination, which is either the most bullish thing about it or the reason to sit on your hands. Bitcoin did something similar last year, August 2025, and it went sideways for two months and then dropped 14%. 😶

The big pamp that happened last month was exciting. Unless you were Cardano. $ADA ( ▲ 2.37% ) sat it out. Price is up 0.3% over 30 days. Up. Three tenths. 🙄

Open contracts fell 31% in the same window, in dollars and in ADA. Total dollar open interest is $182 million, in the bottom 7% of its readings since 2024 and down 87% from the February 2024 peak. A bar with the lights on, no bartender, and no customers.

Because it never rallied, it never got the volatility spike, Cardano's LAR is still in the fourth tier while everyone else's collapsed. Its last week is 73% of its 30-day average. Everyone else is around 25%. It's the one kid still standing in the parking lot after the fire drill ended, which seems like a mean thing to say because it feels personal and now I’ve just made this weird.

Which feels less painful than being one of those long term Cardano hodlers - of which I, admittedly, am. /playworld’ssmallestviolin 🎻

Everyone else's leverage got shaken out in August. $ETH ( ▼ 1.16% )’s just changed floors. 🛗

There are 6.03 million ETH worth of open contracts right now, a hair under the July 14 peak. That number did not move through Ethereum's quietest four weeks since 2024, and it did not move through the 24% rally that followed. Down 0.7%. A rounding error. The rally was leverage riding the elevator up, not leverage getting off.

Funding, the fee longs pay shorts to stay in the trade, is crowded to a level Ethereum has only exceeded about one day in eight. So: the most open contracts since 2024, top-tier volatility, and longs paying up for the privilege, all at once. That's a Jenga tower with a box fan pointed at it.

Now, this doesn’t mean ETH goes down tomorrow. It’s a bill owed and mom or dad forget to setup autopay, or they just forgot. But it’s still a bill. 💵

$SOL ( ▼ 0.19% ) four-week volatility went from its lowest since 2024 to the top tenth in nine days. Vol events happen. What's odd is what isn't happening. Funding rates are negative on 12 of the last 30 days, the most of any of the six tickers we’re looking at today, and Solana is the only one where it's still negative today. After a 28% rally. Shorts are paying longs to hold the bag, and the bag is up 28%. 😯

Open contracts fell 9% during the move, same profile as Bitcoin: a rally built out of people closing shorts, not people opening longs. Nobody wanted to own this. They just stopped wanting to be against it.

The LAR dropped 85% in 30 days, the biggest collapse of the group next to XRP (we’ll get to XRP soon), and now sits in the second-lowest tier. Solana's history from around here is a coin flip: higher 90 days later half the time, median gain of 2%.

So you've got a coin that moved faster than it has at any point since 2024, on a rally nobody funded, with the derivatives crowd still leaning short. Either that's a second leg waiting for an excuse, or it's the first leg finding out it never had one. 🤔

For five of these tickers, a high LAR is a warning and a low one is an opportunity. $XRP ( ▼ 0.02% ) does it the other way around, because, well, XRP is just doing its own thing lately. 🙂

Its highest LAR in the data, June 2024, was the coil before the November run from $0.50 to $2.40. So over the past 2+ years, XRP's top tier has a 52% hit rate over 90 days with a positive median, and its bottom tier has a 30% hit rate with a median loss of 6%. The bottom tier is where XRP is right now, seven days and counting.

Then there's how it got there. Open contracts hit 912 million XRP on Aug 16, the same day it printed its one-year low at $0.99. Most since October. Shorts stacked the exact bottom like they'd been sent a calendar invite. It squeezed 48% in a week. Out all six crypto in today’s newsletter, XRP is the only one where fresh leverage chased the move: open contracts up 15% over 30 days and funding crowded long. It has already given back a third from $1.52.

So the reading is: the one coin whose LAR works like a momentum indicator is at the bottom of its range, holding a fresh crowd of longs who bought the top of a short squeeze. That's a specific kind of uncomfortable.

It's the guy who shows up to the party as the cops arrive and asks where the keg is. 🍺

$LINK ( ▼ 0.92% )’s LAR dropped further in three weeks, into Aug 28, than at any point since the data start in 2024. Bigger than the August 2024 flush. Bigger than February's. And it happened during a 26% rally. 😱

Nope, you didn’t misread that. The largest unwind of leverage Chainlink has printed in that stretch was not longs getting carried out. It was shorts leaving. Open contracts in LINK terms fell 14% on the way from $8.77 to $11.06. Price rose because people stopped betting against it..

Also: compared to the other tickers in today’s newsletter, Chainlink is unique in that it’s the only one with clear long-term hodlers that keep accumulating at lower prices. 👍

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