Gold at its limit, leverage hits record highs: Bitcoin in the crosshairs of double risk
Markets are sending alarming signals that directly threaten risky assets, including Bitcoin (BTC). Two key observations point to an extreme degree of overheating: gold, a traditional safe-haven asset, has turned into a speculative instrument, and the volume of leveraged trading in the US has reached historic highs. This combination creates an extremely fragile environment where any shift in sentiment could trigger a chain reaction.
Gold: From Safe Haven to Risk Asset
Analysis of gold's dynamics shows that the precious metal has likely passed its peak. After a February high of around $5,500 per ounce, the price has corrected by approximately 30%, and it would now be logical to expect a bounce from the round support level near $4,000. However, the overall picture looks overheated. For the first time since 2007, gold's 180-day volatility is trading at a premium of roughly 2.3 times the volatility of the S&P 500 index. This has turned the "safe haven" into a speculative bubble. The last time such an anomaly occurred, it preceded the Great Recession, exposing abnormally low stock market volatility.
Additionally, the rise in yields on 30-year US Treasury bonds to nearly 5.2% (a high since 2007) creates strong pressure on non-yielding assets. Gold finds itself at a disadvantage compared to stocks and bonds, making it vulnerable to further sell-offs.
Record Leverage: $460 Billion at Play
The second, equally alarming signal is the record volume of leveraged speculation in US markets. Assets under management for leveraged and inverse ETFs have reached $208 billion. Considering double and triple leverage, the real volume of positions exceeds $460 billion. Since the beginning of April, this figure has grown by about $200 billion. The lion's share consists of 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. This extreme level of borrowed funds has never been observed before.
What Does This Mean for Bitcoin?
The signal for Bitcoin is twofold. On one hand, if overheated markets with record leverage turn downward, BTC, as a high-risk asset, will come under 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 that is when Bitcoin could capture this demand, offering the market an alternative.
My expert opinion: We are on the verge of a classic "liquidity squeeze." Markets are so saturated with borrowed funds that any significant shock could lead to cascading liquidations. For Bitcoin, this means heightened volatility in the coming weeks—both downward and upward. The key point: can BTC hold above the support zone, or will it become a hostage to the broader market sell-off? In any case, the current configuration is not a time for recklessness.