Gold at its limit, leverage at a record high: Bitcoin under a double blow
Financial markets are sending alarming signals that directly impact the cryptocurrency sector as well. Gold, traditionally considered a safe-haven asset, appears critically overheated, and the volume of speculative leveraged trading on U.S. exchanges has reached historic highs. For Bitcoin (BTC), this combination represents a fragile equilibrium that could be disrupted at any moment.
Both of these observations point to one thing: markets are saturated with bullish bets, while safe-haven instruments are losing their traditional support. In such an environment, even a minor shift in sentiment can trigger a chain reaction with serious consequences for risk assets.
Gold: From Safe Haven to Speculative Instrument
January and February of this year, in my assessment, may have been that rare opportunity to sell gold that comes once in a lifetime. After a correction of roughly 30% from its all-time high, the precious metal faced serious resistance around $4,000 per ounce. However, the overall picture is far from stable.
A key indicator — gold's 180-day volatility — is trading at a premium of approximately 2.3 times the volatility of the S&P 500 index for the first time since 2007. This has transformed the precious metal from a safe haven into a highly speculative asset. The last time such a divergence occurred, it preceded the Great Recession, exposing the abnormally low volatility of the stock market.
When gold was at its peak around $5,500 per ounce in February, it showed a forty-year high relative to its 60-month moving average and a basket of U.S. Treasury bonds. At the same time, most central banks around the world were tightening monetary policy. The rise in yields on 30-year U.S. government bonds to nearly 5.2% in May — the highest since 2007 — creates a powerful headwind for non-yielding assets like gold and Bitcoin. Under current conditions, gold risks being in a losing position compared to stocks.
Record Leverage: Market on the Brink
Simultaneously, U.S. markets are showing a frightening level of speculation. The total assets under management of U.S. 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 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 leveraged optimism on U.S. markets has never been seen before.
Implications for Bitcoin: Scenarios
For Bitcoin, these signals carry a dual threat. On one hand, if overheated markets with record leverage turn downward, BTC, as a high-risk asset, will inevitably 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 seeking a new refuge. And that is when Bitcoin could capture this demand, positioning itself as "digital gold."
My professional opinion: Right now, the market is balancing on a knife's edge. The overheating of gold and record leverage are not just warnings; they are signs that a correction is not just possible but inevitable. For Bitcoin, this means short-term risks have sharply increased, but in the medium term, after the market clears excess margin, BTC could become the main beneficiary of capital flowing out of traditional "safe-haven" assets.