Gold is overheated, leverage is off the charts — bitcoin in the crosshairs of double risk
Markets are flashing warning signals, and ignoring them now is an unaffordable luxury. Gold, the traditional safe-haven asset, appears overheated, while the volume of leveraged trading in the US has hit an all-time record. These two factors are creating an extremely fragile environment for risky assets, and Bitcoin (BTC) is no exception.
Analysis suggests that the January-February peak in gold may have been a once-in-a-lifetime selling opportunity. After a correction of roughly 30%, the precious metal would be "normal to bounce" from the round support level around $4,000 per ounce. However, the overall picture points to overheating. For the first time since 2007, gold's 180-day volatility is trading at a premium of roughly 2.3 times the volatility of the S&P 500 index. This has transformed the precious metal from a defensive asset into a speculative instrument. A similar situation in the past preceded the Great Recession and exposed abnormally low stock market volatility.
Record Leverage: Market on the Brink
Adding to the alarming backdrop is data on leveraged speculation in US markets. Assets under management in US leveraged and inverse ETFs have reached a record $208 billion. Considering double and triple leverage, the real volume of positions exceeds $460 billion. Since the beginning of April, this figure has grown by roughly $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 just a fraction of current levels.
Both observations lead to one conclusion: markets are overloaded with bets on growth, and gold itself has turned into a speculative asset.
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 wavers, some capital will sooner or later begin to seek a new refuge. And that is when Bitcoin could capture this demand.
My expertise: In my view, the current configuration is a classic "overheating before a correction" scenario. Record leverage in the US is a ticking time bomb. Any trigger, whether macroeconomic data or a geopolitical shock, could set off a cascade of liquidations. Bitcoin, as the most volatile of major assets, will find itself at the epicenter. Investors should prepare for heightened turbulence and, possibly, an opportunity to enter a BTC position at significantly lower levels.