Gold is overheated, leverage in the US is at a record high: Is Bitcoin bracing for a storm?
Markets are sending alarming signals that directly impact the prospects of Bitcoin (BTC). Two independent observations point to the formation of an extremely fragile environment for risk assets. This concerns the overheating of gold and an unprecedented level of leverage in the US market.
Gold Loses Its "Safe Haven" Status
An analysis of gold's dynamics reveals an anomaly not seen since 2007. The 180-day volatility of the precious metal is trading at a premium of approximately 2.3 times the volatility of the S&P 500 index. This transforms the traditional safe-haven asset into a speculative instrument. The last time such a situation occurred was before the Great Recession, exposing abnormally low stock market volatility.
In February, gold reached a price peak near $5,500 per ounce. Now, after a correction of roughly 30%, it is at a critical support zone around $4,000. However, the overall picture, in my assessment, remains overheated: the ratio of price to the 60-month moving average is at its highest in 40 years. The rise in 30-year US Treasury yields to nearly 5.2% creates a powerful headwind for non-yielding assets, making gold vulnerable.
Record Leverage: A Powder Keg for the Market
The second, even more alarming signal is the volume of leveraged speculation in the US. Assets under management of US leveraged and inverse ETFs have reached a record $208 billion. Considering double and triple leverage, the real volume of positions exceeds $460 billion. For comparison, during the bear market of 2022, the total exposure of such funds was only a fraction of current levels.
Positioning has become extremely one-sided: inverse funds, which profit from declines, account for only $27 billion. This concentration of bets on growth creates ideal conditions for a cascade of liquidations at any reversal in sentiment.
What Does This Mean for Bitcoin?
The signal for Bitcoin is twofold. On one hand, as a risk asset, BTC could come under a wave of forced selling alongside stocks if overheated markets with record leverage turn downward. On the other hand, if faith in gold as a safe haven falters, some capital will begin to seek a new refuge. And then Bitcoin could capture that demand.
My professional opinion: The current configuration is a classic "tipping point." Ignoring the signals of overheating and record margin debt would be the height of arrogance. Bitcoin is in a zone of elevated risk, but it is precisely in such moments that new trends are born.