Gold at its limit, leverage at a record: Bitcoin in a turbulence zone
Financial markets are sending alarming signals that directly affect the cryptocurrency ecosystem as well. Two independent observations point to the formation of an extremely fragile environment for risky assets, including Bitcoin (BTC). These are the overheating of the gold market and an unprecedented level of leverage on US stock exchanges.
Gold Loses Its "Safe Haven" Status
An analysis of the precious metal's dynamics shows that it has transformed from a defensive asset 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 divergence was observed before the Great Recession, when the stock market exhibited abnormally low volatility.
In February, gold reached a price peak around $5,500 per ounce, a 40-year high relative to its 60-month moving average. Now, after a correction of roughly 30%, the price would "normally bounce" from the round support level near $4,000. However, the overall picture remains overheated. The rise in yields on 30-year US Treasury bonds to nearly 5.2% — a high since 2007 — creates powerful pressure on non-yielding assets. Gold risks ending up in a losing position compared to stocks.
Record Leverage: A Ticking Time Bomb
An even more alarming signal comes from the US market. The assets under management of US ETFs using leverage and inverse funds 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 about $200 billion. The lion's share consists of triple-leveraged funds ($320 billion), followed by double-leveraged funds ($171 billion). Inverse funds, which profit from declines, account for only $27 billion, indicating an extreme one-sidedness in the market. For comparison, during the bear market of 2022, the total exposure of such funds was only a fraction of current levels. Such extreme leverage has never been this high.
What Does This Mean for Bitcoin?
The signal for Bitcoin is twofold. On one hand, if overheated markets with record leverage reverse downward, BTC, as a high-risk asset, could be swept up in a wave of forced selling alongside stocks. On the other hand, if faith in gold as a safe haven falters, capital will begin seeking a new refuge. And then Bitcoin, with its growing institutional base and "digital gold" narrative, could capture this demand.
My Expert Opinion: Markets are in a zone of maximum risk. The current combination of overheated gold and record leverage in the US is a classic recipe for a sharp correction. Bitcoin should prepare for volatility, but the long-term scenario of capital flowing from traditional assets into digital ones remains in effect. Investors should exercise maximum caution and avoid excessive leverage in their portfolios.