Gold is overheated, and leverage in the US is at a record high: what this means for bitcoin
Financial markets are sending several alarming signals that directly affect the cryptocurrency sector as well. On one hand, gold, traditionally considered a safe-haven asset, is showing signs of severe overheating. On the other hand, the volume of leveraged trading in US markets has reached an all-time high. This combination creates an extremely fragile environment for all risk assets, including Bitcoin (BTC).
Is gold no longer a safe haven?
Analysis of gold's current dynamics indicates that the precious metal has lost its protective function and turned into a speculative instrument. For the first time since 2007, gold's 180-day volatility is trading at a premium of approximately 2.3 times the volatility of the S&P 500 index. A similar shift was observed before the Great Recession, when it exposed abnormally low stock market volatility.
In February, when gold reached a price peak of around $5,500 per ounce, it was at a 40-year high relative to its 60-month moving average. Now, after a correction of roughly 30%, the metal would be "normal to bounce" from the round support level around $4,000. However, the overall picture remains overheated, especially against the backdrop of US 30-year Treasury yields rising to nearly 5.2% — a high not seen since 2007. This creates significant obstacles for assets that do not generate passive income, putting gold at a disadvantage relative to stocks.
Record leverage: a ticking time bomb
An even more alarming signal comes from US markets. Assets under management in US leveraged and inverse ETFs have reached a record $208 billion. However, considering double and triple leverage, the real position size exceeds $460 billion. The lion's share — $320 billion — consists of triple-leveraged funds. For comparison, during the bear market of 2022, the total exposure of such funds was only a fraction of current levels.
Positioning has become extremely one-sided: inverse funds, which profit from market declines, account for only $27 billion. This concentration of bets on growth creates a massive risk of cascading liquidations at any reversal in sentiment.
A double blow for Bitcoin
For Bitcoin, the situation carries a double threat. On one hand, if overheated markets with record leverage turn 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 begin seeking a new refuge. And that is precisely when Bitcoin, with its growing institutional base and status as "digital gold," could capture this demand.
My expert opinion: Markets are in a zone of extreme risk. The combination of overheated gold and record leverage is a classic recipe for a sharp correction. Bitcoin should prepare for high volatility: in the short term, selling pressure may intensify, but in the medium term, this is an ideal moment for capital to flow from traditional overheated assets into digital ones.