Overheated gold and record leverage: a double warning signal for bitcoin
Financial markets are sending several alarming signals that directly threaten risky assets, and Bitcoin (BTC) is no exception. An analysis of the current situation indicates that safe-haven assets are losing their traditional function, while speculative leverage in US markets has reached critical levels.
Gold: From Safe Haven to Speculation
Gold, long considered a safe haven, has turned into an extremely volatile and overheated asset. For the first time since 2007, its 180-day volatility is trading at a premium of nearly 2.3 times compared to the volatility of the S&P 500 index. A similar shift was observed before the Great Recession and indicates that the precious metal now behaves like a high-risk instrument.
After reaching a price peak of around $5,500 per ounce in February, the correction amounted to approximately 30%. The asset is now near critical support around $4,000, and a bounce from this level would be technically justified. However, the overall context remains troubling: the rise in yields on 30-year US Treasury bonds to nearly 5.2% (the highest since 2007) creates strong pressure on assets that do not generate income. In this environment, gold risks being in a losing position relative to stocks.
Record Leverage: Market on the Brink
Adding to the concerning picture is data on unprecedented levels of leveraged speculation in US markets. The total assets under management of US leveraged and inverse ETFs 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.
The lion's share ($320 billion) consists of triple-leveraged funds, followed by double-leveraged instruments ($171 billion). Moreover, 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 only a fraction of current levels. Markets have never seen such extreme leveraged optimism.
What Does This Mean for Bitcoin?
For Bitcoin, the signal is twofold. On one hand, if overheated markets with record leverage reverse downward, BTC, as a risky 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, some capital will sooner or later begin to seek a new refuge. And that is when Bitcoin, with its "digital gold" narrative, could capture this demand.
My analysis: The current market configuration resembles a compressed spring. Record leverage combined with overheating in traditional safe-haven assets creates ideal conditions for a sharp move. I expect that in the coming weeks, volatility across all asset classes, including Bitcoin, will increase significantly.