Gold on the verge of overheating, leverage in the US hits records — Bitcoin in the risk zone
Markets are sending several alarming signals that together create an explosive mix for risky assets, including Bitcoin (BTC). Two key observations—gold overheating and a record volume of leveraged trading in the US—point to a critical overcrowding of the market with bullish bets. In such an environment, any shift in sentiment could trigger a chain reaction of forced selling.
Gold has lost its safe-haven status
Gold, traditionally considered a safe-haven asset, now looks clearly overheated. Analysts are noting an anomaly: the 180-day volatility of the precious metal is trading at a premium of nearly 2.3 times the volatility of the S&P 500 index for the first time since 2007. This has turned gold from a quiet haven into a speculative instrument with risk comparable to growth stocks. The last time such dynamics occurred, they preceded the Great Recession and exposed abnormally low stock market volatility, which sharply turned into a crash.
When gold peaked at around $5,500 per ounce in February, it was at a forty-year high relative to its 60-month moving average and a basket of US government bonds. Meanwhile, most central banks had already shifted to raising interest rates. The rise in 30-year US Treasury yields to nearly 5.2% in May—a high since 2007—adds further pressure on non-yielding assets. Gold risks being in a losing position relative to stocks if rates continue to rise.
Record leverage—a powder keg for the market
An additional source of concern is data on leveraged speculation in US markets. Assets under management of US leveraged and inverse 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 about $200 billion. The lion's share comes from triple-leveraged funds ($320 billion), followed by double-leveraged funds ($171 billion).
Positioning has become extremely one-sided: inverse funds, which profit from market 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. The leverage embedded in US markets, by estimates, has never been so extreme.
What this means for Bitcoin
For Bitcoin, the signal is twofold. On one hand, if overheated markets with record leverage reverse downward, BTC as a risky 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 sooner or later begin to seek a new refuge. And then Bitcoin could capture this demand, especially amid growing institutional interest in digital assets.
Expert opinion: The current situation resembles a classic "risk paradox": the more markets bet on continued growth, the more vulnerable they become to any negative news. For Bitcoin, the next month will be key—either it confirms its status as a diversifier and captures capital from gold, or it falls along with everything else under the weight of leveraged liquidations. In any case, volatility will be high.