Traders Shift to Leveraged ETFs, Gold Amid Market Volatility

Traders are increasingly adopting contrasting exchange-traded fund (ETF) strategies to navigate the unpredictable financial markets. This year has seen unprecedented inflows into ETFs that offer leveraged long exposure to volatile assets like stocks and cryptocurrencies, as well as funds holding risk-off assets such as cash and gold.

Leveraged ETFs are designed to amplify the daily performance of assets, often by two or three times, making them attractive to traders looking to capitalize on short-term market movements. However, these funds also come with higher risks, as losses can be magnified just as quickly as gains.

In 2025, leveraged long ETFs attracted net inflows of roughly $6 billion, while inflows into cash and gold funds approached roughly $4 billion. This trend highlights the dual strategy of investors who are both buying the dip and hedging against potential market downturns.

The surge in fund flows coincides with a spike in market turbulence following the announcement of sweeping tariffs on US imports. This volatility has led to a significant shift in investment strategies, with traders seeking out assets that can provide stability and potential gains in an uncertain environment.

Bitcoin, often referred to as "digital gold," has shown resilience amidst the market turbulence. Despite its weak correlation with traditional safe-haven assets like gold, Bitcoin has demonstrated some stability, trading above $93,000 as of April 23. This resilience has attracted significant inflows into Bitcoin ETFs, which clocked nearly $1 billion in net inflows on April 22.

However, analysts note that gold remains the preferred safe-haven asset for most investors. Its historical performance during times of economic uncertainty makes it an attractive option for those looking to diversify their portfolios and mitigate risk. The increased interest in gold ETFs further underscores this trend, as these funds provide an accessible and liquid way to invest in the precious metal.

The move towards leveraged ETFs and gold is a clear indication of the current market sentiment, which is characterized by caution and a focus on risk management. Investors are becoming more aware of the potential for market volatility and are taking proactive steps to protect their investments. This shift in strategy is likely to continue as long as market conditions remain uncertain, with traders and investors alike seeking out assets that can provide stability and potential gains in a volatile environment.