Why Bitcoin’s rally is dangerous according to new Fed data

Bitcoin’s rally and the Federal Reserve’s new financial-risk gauge describe two different time horizons. BTC reflects demand and positioning in today’s market. The Fed’s measure tracks structural weaknesses that could magnify the next shock.The Financial Vulnerability Index is built to capture slow-moving vulnerability rather than coincident market stress. In Figure 2, the final financial-leverage annotation is 0.83, inside the “elevated” band of its historical distribution. The aggregate index is labeled 0.65, valuation pressure 0.77 and funding risk 0.62, all “notable.” Household and business borrowing is lower at 0.26.Figure 2: Heatmaps of aggregate FVI and its subindices. Red: 0.81-1 percentiles (Elevated); orange: 0.61-0.8 percentiles (Notable); yellow: 0.41-0.6 (Moderate); green: 0.21-0.4 (Low); blue: 0.01-0.2 (Extremely Subdued).The chart labels the four components Q1 and the aggregate index Q2, with 2026 as the last axis mark. The working paper separately says its dataset and several estimation samples end in 2025:Q4, without explaining whether the endpoints are later-vintage observations, nowcasts or a labeling issue. That limits the safe description to Figure 2’s quarter ...