Hedge funds have accumulated record leverage: Goldman Sachs and JPMorgan warn of a $165 billion correction
The world's largest hedge funds have raised their leverage to a five-year high. Leading investment banks — Goldman Sachs and JPMorgan — are simultaneously warning: overheating in the tech giant market and excessive leverage are creating conditions for a major correction. According to analysts, institutional investors could sell up to $165 billion worth of stocks as part of a quarterly portfolio rebalancing, triggering a cascading decline.
The situation in the stock market resembles a taut string. Data from Goldman Sachs' prime brokerage division shows that total hedge fund leverage reached 294% in June 2025 — the highest level in five years. Net leverage, meanwhile, hit four-year highs. This concentration of borrowed funds makes the market extremely vulnerable to any triggers.
JPMorgan strategist Nikolaos Panigirtzoglou emphasizes that bets on the semiconductor sector are so overheated that the likelihood of new waves of selling has significantly increased. The value-at-risk mechanism used by funds automatically triggers forced liquidation of positions when internal volatility limits are exceeded. This creates a domino effect, especially in overheated AI trades.
A comparative analysis by JPMorgan shows that the price-to-revenue multiple for semiconductor companies is more than 6 times higher than the same metric for the "Magnificent Seven" tech giants (3 times). Such a high concentration of capital in one sector makes it extremely vulnerable: a local deterioration in sentiment among major players can trigger a cascading correction.
Correction Mechanism and Impact on Bitcoin
The main trigger is the quarterly rebalancing. According to JPMorgan's calculations, in the final days of June, institutional players could sell up to $165 billion worth of stocks. The largest seller is Japan's GPIF pension fund with $1.9 trillion in assets, accounting for about $60 billion. U.S. pension funds will add another $55 billion, while entities from Norway and Switzerland will contribute several tens of billions. This outflow will be partially offset by balanced investment funds (about $15 billion), but it will not relieve the overall pressure.
The Fed's hawkish rhetoric is another factor. Fed Chair Kevin Warsh, after the June meeting, maintained current monetary policy parameters but left the door open for a new round of tightening before year-end. This quickly cooled investor hopes for an imminent easing of conditions, adding turbulence to the exchanges.
Bitcoin, having lost its safe-haven properties, behaves like a highly volatile tech stock. The price is holding around $64,100 with a market cap of about $1.29 trillion, but has repeatedly corrected towards the lower boundary of the psychological $60,000 range in recent weeks. The cryptocurrency is now fully synchronized with sentiment in traditional markets, and a wave of institutional sell-offs could intensify pressure on digital assets.
My expert opinion: The market is at a dangerous point. Overheating in the AI sector and record hedge fund leverage are classic signals for a correction. Bitcoin, as a high-risk asset, could face a double blow: a liquidity drain from traditional markets and its own structural problems (low mining profitability, dependence on institutional capital inflows). Investors should prepare for heightened volatility in the coming weeks.