Gold is overheated, leverage in the U.S. hits record highs: Bitcoin at a crossroads
Markets are sending alarming signals. Two independent observations indicate that the financial system is overloaded with bullish bets, while traditional safe-haven assets are losing their footing. In such an environment, any shift in sentiment could trigger a chain reaction that will also affect Bitcoin (BTC).
Gold: From Safe Haven to Speculative Asset
An analysis of gold's dynamics shows that the precious metal appears overheated. For the first time since 2007, its 180-day volatility is trading at a premium of nearly 2.3 times the volatility of the S&P 500 index. This has transformed gold from a classic safe haven into a speculative risky asset. The last time such an anomaly was observed was before the Great Recession.
After reaching a price peak of around $5,500 per ounce in February, gold has corrected by approximately 30%. However, even now, it remains at a forty-year high relative to its 60-month moving average. The rise in yields on 30-year U.S. Treasury bonds to nearly 5.2% in May — the highest since 2007 — creates additional pressure on non-yielding assets. In this configuration, gold risks being in a losing position compared to stocks.
Record Leverage: $464 Billion at Play
An even more alarming signal comes from the U.S. market. The assets under management of leveraged and inverse U.S. ETFs have reached a record $208 billion. Considering double and triple leverage, the real volume of positions exceeds $464 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 markets has never been so extreme.
A Dual Signal for Bitcoin
For Bitcoin, this signal is dual. On one hand, if overheated markets with record leverage turn downward, Bitcoin, 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 wavers, some capital will sooner or later begin to seek a new refuge. And that is when Bitcoin could capture this demand.
Cryptalist Expert Opinion: The market is in a dangerous zone. Record leverage is a powder keg. Any external shock could trigger a cascade of liquidations. For Bitcoin, this is a critical moment: it will either confirm its status as "digital gold" and attract capital fleeing overheated assets, or it will share the fate of risky assets in a general collapse. I lean toward the first scenario, but only on the condition that BTC holds above key support levels.