Overheated gold and record leverage in the US — bitcoin on the verge of a correction
Financial markets are sending several alarming signals that directly threaten risky assets, including Bitcoin (BTC). An analysis of the current situation points to overheating in gold and an unprecedented level of leverage on U.S. exchanges. Together, these factors create an extremely fragile and explosive environment where any shift in sentiment could trigger a cascade of liquidations.
Gold Loses Its "Safe Haven" Status
Gold, traditionally considered a safe-haven asset, now appears overheated. Historical analysis shows that the 180-day volatility of the precious metal is trading at a premium of roughly 2.3 times the volatility of the S&P 500 index. Such a divergence has only been observed once before — ahead of the Great Recession of 2007. This has transformed gold from a refuge into a speculative instrument, now carrying risks similar to those of the stock market.
The peak in gold prices, recorded in February around the $5,500 per ounce mark, coincided with a forty-year high relative to the 60-month moving average. Meanwhile, the yield on 30-year U.S. Treasury bonds reached 5.2% in May — a high not seen since 2007. Under these conditions, gold, which generates no interest income, finds itself in a clearly losing position compared to bonds and stocks. The market is clearly signaling: the time to sell gold may have been in January-February of this year.
Record Leverage: The Market on the Brink
An even more alarming signal comes from the U.S. market. The total assets under management of leveraged and inverse U.S. ETFs have reached a record $208 billion. However, accounting for double and triple leverage, the real exposure of positions exceeds $460 billion. Notably, since the beginning of April, this figure has grown by roughly $200 billion. The lion's share ($320 billion) consists of triple-leveraged funds, followed by double-leveraged instruments ($171 billion). Inverse funds, which profit from declines, have accumulated a mere $27 billion.
Such a one-sided market positioning — almost purely "long" — has no historical precedent. Even during the bear market of 2022, total exposure was only a fraction of current levels. This means the market is maximally geared for growth, and any external shock could trigger a chain reaction of forced selling.
What Does This Mean for Bitcoin?
For Bitcoin, the situation is twofold. On one hand, as a high-risk asset, it will inevitably be caught in a wave of sell-offs alongside stocks if the overheated U.S. market begins to reverse. Record leverage is a ticking time bomb, and BTC will not be able to stay out of the general panic.
On the other hand, if faith in gold as a safe-haven asset continues to weaken, some capital will inevitably start seeking new "refuges." And here, Bitcoin could capture this demand, strengthening its status as "digital gold." However, in the short term, the risks of a correction due to overheating in traditional markets appear far more real than a scenario of immediate growth.
My opinion: Ignoring these macroeconomic signals now is playing with fire. The market is so flooded with cheap money and leverage that a correction is only a matter of time. Bitcoin, despite its fundamental advantages, remains a hostage to risk appetite in global markets for now.