Overheated gold and record leverage: a double warning signal for bitcoin
Several alarming signals have accumulated in the financial markets, directly affecting cryptocurrencies as well. Gold, traditionally considered a safe-haven asset, is showing signs of overheating, while trading volumes with leverage in US markets have hit an all-time high. These two factors are creating an extremely fragile environment for all risk assets, including Bitcoin (BTC).
Gold Loses Its Safe-Haven Status
Analysis of market data shows that the 180-day volatility of gold is trading at a premium of approximately 2.3 times the volatility of the S&P 500 index for the first time since 2007. This anomaly transforms the precious metal from a defensive instrument into a speculative asset. The last time such a situation occurred, it preceded the Great Recession.
When gold reached a price peak of around $5,500 per ounce in February, it was at a forty-year high relative to its 60-month moving average. Meanwhile, most central banks had already shifted to raising rates, and the yield on 30-year US Treasury bonds rose to nearly 5.2% — a high not seen since 2007. In such conditions, assets that do not generate income find themselves at a disadvantage.
Record Leverage — A Ticking Time Bomb
An additional risk factor is the unprecedented level of speculation with leverage in US markets. Assets under management of US leveraged and inverse ETFs have reached a record $208 billion. Considering double and triple leverage, the real volume of positions exceeds $460 billion. Since the beginning of April, it has grown by about $200 billion.
The lion's share comes from triple-leveraged funds ($320 billion), followed by double-leveraged funds ($171 billion). Positioning has become extremely one-sided: inverse funds, which profit from declines, account for only $27 billion. For comparison, during the bear market of 2022, the total exposure of such funds was only a fraction of current levels.
What Does This Mean for Bitcoin?
Both signals lead to one conclusion: markets are overloaded with bullish bets, and gold, the traditional safe haven, has itself turned into a speculative asset. For Bitcoin, the situation is twofold. On one hand, if overheated markets with record leverage reverse downward, BTC, as a risk asset, could be caught in a wave of forced selling alongside stocks. On the other hand, if faith in gold as a safe haven falters, some capital will sooner or later begin to seek a new refuge, and Bitcoin could capture that demand.
My Expertise: The current market configuration resembles preparation for a major shock event. The combination of overheated gold and record leverage in the US is not just a statistical anomaly but an indicator of extreme market euphoria. Bitcoin is at a crossroads: it could either become a victim of liquidations or, conversely, benefit from capital flowing out of traditional overheated assets. Investors should be prepared for high volatility in the coming weeks.