Gold is overheated, leverage in the US hits record highs: double risk for Bitcoin
Financial markets are sending alarming signals that directly impact Bitcoin's prospects. I am tracking two key trends creating an extremely fragile environment for risk assets: gold overheating and unprecedented levels of speculative leverage in the US.
Gold: From Safe Haven to Speculative Asset
My analysis shows that gold, traditionally considered a safe-haven asset, is now exhibiting anomalies typical of risk instruments. For the first time since 2007, gold's 180-day volatility is trading at a 2.3x premium to the S&P 500 index volatility. This transforms the precious metal into a speculative tool. The last time such a situation occurred, it preceded the Great Recession and exposed abnormally low stock market volatility.
The gold price peak around $5,500 per ounce in February coincided with a 40-year high relative to the 60-month moving average and a basket of US Treasury bonds. The rise in 30-year government bond yields to nearly 5.2% (a high since 2007) creates a significant obstacle for non-yielding assets. In my view, gold risks being in a losing position compared to equities.
Record Leverage: A Market on Fragile Ground
An even more troubling signal is the record volume of leveraged trading in US markets. Assets under management for US leveraged and inverse ETFs have reached $208 billion. Considering double and triple leverage, the real position size exceeds $460 billion. Since the beginning of April, this figure has grown by approximately $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 declines, account for only $27 billion. For comparison, during the 2022 bear market, the total exposure of such funds was merely a fraction of current levels. The leverage embedded in US markets has never been this extreme.
What Does This Mean for Bitcoin?
Both signals point to one thing: markets are overloaded with bullish bets, and safe-haven assets are losing their footing. For Bitcoin, this is a dual scenario. On one hand, if overheated markets with record leverage reverse downward, a wave of forced selling could affect it as well. On the other hand, if faith in gold as a safe haven wavers, capital will seek a new refuge, and Bitcoin could capture that demand.
My Expert Opinion: Markets are in a zone of maximum risk. Any shift in sentiment could trigger a chain reaction of liquidations. Bitcoin, as a highly liquid asset correlated with risk assets, will find itself at the epicenter of the storm. However, it is precisely in such moments that its potential as an alternative store of value emerges.