Gold is overheated, leverage in the US hits records — Bitcoin in a turbulence zone
Financial markets are sending alarming signals that directly affect the cryptocurrency sphere. Two independent analyses point to the formation of an extremely fragile and risky environment for all risk assets, including Bitcoin (BTC). This concerns the overheating of the gold market and an unprecedented level of leverage on US exchanges.
Gold Loses Its "Safe Haven" Status
The current dynamics of gold raise serious questions. Analysts note that the precious metal has transformed from a classic safe-haven asset into a speculative instrument. For the first time since 2007, the 180-day volatility of gold is approximately 2.3 times higher than the volatility of the S&P 500 index. Such an anomaly was observed before the Great Recession, which in itself is a historical warning.
In February of this year, gold reached a price peak of around $5,500 per ounce, a 40-year high relative to its 60-month moving average. This was followed by a correction of approximately 30%, and the metal is now consolidating around the $4,000 mark. However, in my view, this is not stabilization but rather a pause before a possible further decline. The rise in yields on 30-year US Treasury bonds to nearly 5.2% — a high since 2007 — creates powerful alternative pressure on non-yielding assets such as gold and Bitcoin.
Record Leverage: A Market on a Powder Keg
The second, even more alarming signal is the record volume of leveraged trading in US markets. According to data, assets under management of US leveraged and inverse ETFs have reached a staggering $208 billion. Considering double and triple leverage, the real volume of positions exceeds $460 billion, having grown by approximately $200 billion since the beginning of April. The lion's share consists of triple-leveraged funds ($320 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. This volume of borrowed funds makes the market extremely vulnerable to any sharp reversal in sentiment.
My analysis: The scenario for Bitcoin is twofold. On one hand, if the overheated stock market begins to collapse, triggering a wave of forced selling, BTC as a risk asset will inevitably be caught in the crossfire. On the other hand, if faith in gold as a safe-haven asset continues to weaken, some capital may flow into Bitcoin as the new "digital gold." However, under current conditions, the second scenario seems less likely. The market is balancing on a knife's edge, and investors should be prepared for a sharp correction.