Overheated gold and record leverage in the US: what this means for Bitcoin
Markets are sending alarming signals. Gold, traditionally considered a safe-haven asset, is showing signs of overheating, while the volume of speculative leveraged trading in the US is hitting all-time highs. This combination creates a fragile foundation for all risk assets, including Bitcoin (BTC).
Gold: From Safe Haven to Speculative Instrument
Analysis of the current situation in the gold market points to its anomalous behavior. For the first time 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 has transformed gold from a classic safe-haven asset into a highly speculative instrument, which in itself is a red flag. The last time such dynamics occurred, they preceded the Great Recession.
After reaching a price peak of around $5,500 per ounce in February, gold corrected by approximately 30%. However, its current position relative to the 60-month moving average and a basket of US Treasury bonds is at a forty-year high. The rise in the yield on 30-year US government bonds to nearly 5.2% (a high since 2007) creates additional pressure on non-yielding assets. In such an environment, gold risks being in a losing position compared to stocks.
Record Leverage: A Bubble Ready to Burst?
An even more alarming signal comes from the US market. The volume of assets under management in leveraged ETFs and inverse funds has reached a record $208 billion. Considering the effect of double and triple leverage, the real volume of positions exceeds $460 billion. Moreover, 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 funds ($171 billion).
Market positioning has become extremely one-sided: inverse funds that 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. The leverage embedded in US markets has never been this extreme.
Dual Signal for Bitcoin
Both of these observations lead to one thought: markets are overloaded with bets on growth, and traditional safe-haven assets are losing their footing. For Bitcoin, this creates a dual picture.
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 falters, some capital will sooner or later begin to seek a new refuge. And that is when Bitcoin could capture this demand.
My professional opinion: The current market configuration is a classic "compressed spring" scenario. Record leverage makes the system extremely vulnerable to any external shock, and in such an environment, Bitcoin could become both a victim and a primary beneficiary. Investors should be prepared for high volatility in the coming weeks.