Gold is overheated, leverage in the US hits record highs: what this means for bitcoin
Markets are sending alarming signals that directly impact Bitcoin's prospects. Two independent observations point to an extremely fragile state of the global financial system: the classic safe-haven asset, gold, appears overheated, and the level of speculative leverage in US markets has reached an all-time high. In such an environment, even a minor shift in sentiment could trigger a chain reaction.
Gold Loses Its 'Safe Haven' Status
An analysis of long-term trends suggests that gold may have passed its peak. After reaching a February high of around $5,500 per ounce, the price corrected by approximately 30%, and the metal is now consolidating near the support level of $4,000. However, the main indicator of overheating is volatility. For the first time since 2007, gold's 180-day volatility is trading at a premium of nearly 2.3 times that of the S&P 500 index.
This ratio has transformed the precious metal from a safe haven into a speculative instrument. The last time such an anomaly was observed was before the Great Recession. The rise in yields on 30-year US Treasury bonds to nearly 5.2% (a high since 2007) creates additional pressure on assets that do not generate interest income. In this battle for capital, gold risks ending up in a losing position relative to stocks.
Record Leverage: $460 Billion at Play
The picture is compounded by an explosive growth in leveraged speculation in US markets. The total volume of positions managed by US ETFs using borrowed funds and inverse funds has reached a record $208 billion. However, 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.
Of particular concern is the market's one-sidedness: 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. The US market has never seen such an extreme imbalance in favor of bullish bets.
The implication for Bitcoin is twofold. On one hand, if overheated markets with record leverage turn downward, Bitcoin, as a high-risk 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, capital will begin to seek a new refuge. And then, Bitcoin, with its 'digital gold' narrative, could capture this demand.
My expert assessment: the current situation resembles a taut string. Markets are fixated on growth, while protective mechanisms are weakened. Bitcoin stands at a crossroads — either it will share the fate of traditional risk assets during a correction, or it will strengthen its role as an independent asset in a new financial paradigm. The key trigger is a change in the Federal Reserve's monetary policy.