Gold at its limit, leverage at a record high: Bitcoin caught between a rock and a hard place
Markets are sending alarming signals, and as an analyst, I see the picture shaping up to be extremely tense. Two independent observations simultaneously indicate that we are approaching a critical point. Gold, the traditional safe-haven asset, appears overheated, while trading volume with leverage on US markets has reached historic highs. For Bitcoin (BTC) and other risk assets, this creates an extremely fragile environment.
Strategic indicators for gold signal deep overheating. After a correction of roughly 30% from peak levels around $5,500 per ounce, the precious metal could find support near $4,000. However, the overall picture is far more concerning. 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 transformed the precious metal from a safe haven into a speculative instrument. The last time such a divergence occurred, it preceded the Great Recession and exposed abnormally low stock market volatility. The rise in 30-year US Treasury bond yields to nearly 5.2% — a high since 2007 — creates a powerful obstacle for assets that do not generate income. In this configuration, gold risks ending up in a losing position relative to stocks.
Record Leverage: A Powder Keg for the Market
The second, equally important factor is the unprecedented level of speculation with leverage in the US. Data shows that assets under management for US leveraged and inverse ETFs have reached a record $208 billion. Accounting for double and triple leverage, the real volume of positions exceeds $460 billion. Moreover, since the beginning of April, this figure has grown by roughly $200 billion. The lion's share — $320 billion — consists of triple-leveraged funds, followed by $171 billion in double-leveraged ones. Positioning has become extremely one-sided: 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 merely a fraction of current levels. Markets have never seen such extreme leveraged optimism before.
Both of these observations lead to one conclusion: markets are overloaded with bets on growth to the limit, and gold itself has turned from a familiar safe haven into a speculative asset. For Bitcoin, the signal is dual. On one hand, if overheated markets with record leverage reverse downward, Bitcoin as a risk asset could come under a wave of forced selling alongside stocks. On the other hand, if faith in gold as a safe haven wavers, part of the capital will sooner or later begin to seek a new refuge. And that is when Bitcoin could capture this demand.
My conclusion: We are currently witnessing a classic scenario of "overheated optimism" in traditional markets, which creates systemic risk. Bitcoin is at a crossroads: a short-term correction due to a synchronized sell-off of risk assets seems the more likely scenario, but the medium-term prospect of capital flowing from "speculative gold" remains extremely bullish for BTC.