Overheated gold and record leverage: why bitcoin ended up on a minefield
Markets are sending alarming signals that directly threaten Bitcoin and other risk assets. Gold, traditionally considered a safe haven, is showing signs of overheating, while the volume of leveraged trading in the US has soared to unprecedented heights. The combination of these factors creates an extremely fragile structure, where any downward movement could trigger a cascade of liquidations.
Gold: From Safe Haven to Speculative Bubble
Analysis of the precious metal's dynamics points to an anomaly not seen since 2007. Gold's 180-day volatility is currently trading at a premium of approximately 2.3 times the volatility of the S&P 500 index. This transforms gold from a defensive instrument into a high-risk speculative asset. The last time a similar situation occurred, it preceded the Great Recession, exposing excessively low stock market volatility.
In February, when gold peaked at around $5,500 per ounce, it was at a 40-year high relative to its 60-month moving average and a basket of US Treasury bonds. 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. The rise in yields on 30-year US government bonds to nearly 5.2% (a high since 2007) creates a powerful headwind for non-yielding assets, putting gold at a disadvantage relative to stocks.
Record Leverage: A Ticking Time Bomb
An even more alarming signal comes from the US market. Assets under management for leveraged and inverse US 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, this figure has grown by approximately $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. Such extreme leverage in US markets has never been seen before.
A Double Blow for Bitcoin
For Bitcoin, this situation poses a dual threat. On one hand, if overheated markets with record leverage reverse downward, BTC, as a risk asset, will 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 that is precisely when Bitcoin could capture this demand.
Analyst's Opinion: The current market configuration resembles a taut string. Record leverage is not a sign of strength, but an indicator of extreme greed and overconfidence. Any external shock, whether a tightening of Fed rhetoric or a geopolitical crisis, could act as a trigger. In such an environment, Bitcoin looks less like a hedge and more like a high-beta asset, poised for sharp movements in either direction. Investors should prepare for heightened volatility.