Gold is overheated, leverage is off the charts: what this means for bitcoin
Markets are sending alarming signals that directly affect Bitcoin. Two independent observations point to a critical imbalance: gold, traditionally considered a safe haven, has turned into an overheated speculative asset, and the volume of leveraged trading on US exchanges has reached an all-time high. This combination creates an extremely fragile environment for all risk assets, including the leading cryptocurrency.
Gold: From Safe Haven to Speculation
My analysis shows that gold has lost its protective function. After a February peak of around $5,500 per ounce, the metal corrected by approximately 30%, but the key issue is not the price, but the behavior. For the first time since 2007, gold's 180-day volatility is trading at a premium of nearly 2.3 times the volatility of the S&P 500 index. This has turned the precious metal into a classic risk asset. Moreover, in February, at its peak, gold was at a 40-year high relative to its 60-month moving average and a basket of US government bonds. At the same time, most central banks around the world began raising rates. The yield on 30-year Treasuries rose to nearly 5.2% — a high since 2007. In such an environment, non-yielding assets like gold and Bitcoin find themselves at a distinct disadvantage compared to stocks and bonds.
Record Leverage: A Ticking Time Bomb
The second, and perhaps more dangerous, signal is the unprecedented level of leverage in US markets. The volume of positions managed by US leveraged and inverse ETFs has reached $208 billion. Considering double and triple leverage, the real volume of positions exceeds $460 billion. Moreover, since the beginning of April, it has grown by approximately $200 billion. The lion's share — $320 billion — is in triple-leveraged funds. For comparison, during the bear market of 2022, the total exposure of such funds was only a fraction of current levels. Such a one-sided bet on growth (inverse funds account for only $27 billion) has never been so extreme.
Expert Commentary: Markets are overloaded with bets on growth, while safe-haven assets have lost their support. Any shift in sentiment could trigger a chain reaction of forced selling. For Bitcoin, this is a double risk: as a risk asset, it could be caught in a wave of liquidations alongside stocks. However, there is also a flip side — if faith in gold is finally shaken, capital could flow into Bitcoin as a new store of value. Investors should prepare for increased volatility in the coming weeks.