Imbalance and Harmony: A world without leverage is unimaginable. It is the cost of convenience, a way of smoothing income and lifestyle over time. When leverage knocks on the door of asset markets, it arrives with a speculative bent. And as asset prices leap ahead, pay attention to the potential emergence of a leverage imbalance. The move in crypto through June 23 was a big one. Bitcoin rose 24% over a one-week period versus a market-based volatility expectation of 8% (Source: Coinmetrics). Not surprisingly, implied volatility increased. But signals on the speculative side are otherwise muted – upside call-option volatility is only a touch higher than the equivalent put. Surprising. So, we dig a bit deeper, evaluating the CFTC Commitment of Traders (COT) Report. Each week, the COT Report disaggregates the open interest in futures – the total shorts and longs – by the types of market participants. Bitcoin open interest is near all-time highs on the CFTC – notable. But the risk is modest. For one, CFTC futures have gained market share. Further, there is a balanced distribution across market participants. Asset managers are long to the tune of ~$1 billion. Smaller traders are the better signal. They are the most elastic – and the most wrong, historically. And their positioning is flat. Hedge funds are the natural liquidity providers, arbitrageurs across exchanges where bitcoin trades, taking the other side of the long exposures of other traders. At a price. And that price makes it more expensive to be long, with a steepening of the forward curve. It is the cost of Bitcoin’s leverage long convenience, the price of greed. But the curve is flat, yields are low. Such is the delicate balance of markets – imbalance is not today’s problem.