(Bloomberg) - Michael Burry, who rose to prominence for his wager against the US housing market ahead of the 2008 financial crisis, warned that Bitcoin’s plunge could deepen into a self-reinforcing “death spiral,” inflicting lasting damage on companies that have spent the past year stockpiling the token.
In a Substack post Monday, Burry argued that the original cryptocurrency, which has fallen 40% since peaking in October, has been exposed as a purely speculative asset, failing to take off as a debasement hedge similar to precious metals. Further losses, he said, could rapidly strain the balance sheets of major holders, force selling across the crypto ecosystem and trigger widespread value destruction.“Sickening scenarios have now come within reach,” Burry wrote. Should Bitcoin fall another 10%, Strategy Inc., the world’s largest corporate crypto treasury, would be billions in the red and “find capital markets essentially closed.” Additional drops, he said, would push Bitcoin miners toward bankruptcy.
His comments come as Bitcoin tumbled below $73,000 Tuesday to its lowest since President Donald Trump retook the White House a little more than a year ago. Analysts have offered a range of explanations for the slump, from fading inflows to deteriorating liquidity and a broader loss of macro appeal. A number of crypto-native traders are also cooling on the token economy, gravitating toward event betting as prediction markets take off.
Bitcoin has failed to respond to typical drivers like dollar weakness or geopolitical risk, unlike gold and silver which rallied to records as global tensions fueled fears about dollar debasement.
“There is no organic use case reason for Bitcoin to slow or stop its descent,” Burry wrote.
The token’s adoption by corporate treasuries and new crypto-linked spot exchange-traded funds is not enough to buoy its price indefinitely, or prevent devastating consequences if it falls dramatically, he said. Nearly 200 public companies hold Bitcoin, he noted.
While that’s helped broaden demand, “there is nothing permanent about treasury assets,” he wrote.
Treasury assets must be marked to market and included in financial reporting. If Bitcoin’s price continues to fall, risk managers will start advising their companies to sell, Burry warned.
He added that the advent of spot ETFs has only inflamed Bitcoin’s speculative nature, while also increasing the token’s correlation with stock markets. Bitcoin’s correlation with the S&P 500 has lately approached 0.50, he wrote. Theoretically, liquidations will kick in aggressively when loss positions start to grow.
Burry added that Bitcoin ETFs have been notching some of their biggest single-day outflows since late November, with three of them occurring in the last 10 days of January.
Still, while Burry warns of fallout, crypto’s footprint remains too small to trigger broad contagion. Bitcoin’s $1.5 trillion market value, limited household exposure, and narrow corporate uptake suggest any wealth effect is likely to stay contained.
By some measures, the digital-asset treasury bubble has already burst. Retail leverage has dried up, and past collapses — from Terra to FTX — failed to infect traditional markets. Bulls now point to regulatory clarity and cheap valuation as fuel for another snapback.
Strategy co-founder Michael Saylor has emphasized that there is no immediate financial stress. The firm faces no margin calls, and there is no expectation it will be forced to sell Bitcoin. Strategy also built a $2.25 billion cash cushion through stock sales that will cover interest payments and distributions for more than two years. But without a rebound in Bitcoin or fresh investor demand for its equity, the firm’s room to maneuver is shrinking.
Meanwhile, many crypto miners have been able to raise funding through open-market share sales while capitalizing on the enthusiasm for data center service providers amid the recent AI boom.
But as Bitcoin continues to drop below certain key levels, Burry sees it contaminating broader markets. He cited the fall in the cryptocurrency as partly to blame for the recent collapse in gold and silver as corporate treasurers and speculators needed to de-risk by selling profitable positions in tokenized gold and silver futures.
These tokenized metal futures are not backed by actual physical metals and can overwhelm trading in physical metals, causing “a collateral death spiral,” he said.
“It looks like up to $1 billion in precious metals were liquidated at month’s very end as a result of falling crypto prices,” Burry wrote. If Bitcoin were to fall to $50,000, miners would go bankrupt, while “tokenized metals futures would collapse into a black hole with no buyer,” he said.
By Emily Mason
With assistance from Vildana Hajric and Dave Liedtka
