“Big Short” Burry Warns Bitcoin Down 40%; Additional 10% Decline Could Trigger “Disastrous Consequences”

Michael Burry, renowned for forecasting the 2008 U.S. housing market collapse, cautioned that Bitcoin’s roughly 40 percent decline could inflict lasting harm on companies that accumulated substantial holdings over the past year. In a Substack post published Monday, Burry characterized Bitcoin as a speculative asset that has failed to perform as a hedge comparable to precious metals.

Burry argued that a further 10 percent drop in Bitcoin would produce multibillion‑dollar losses for one of the most aggressively positioned corporate holders, Strategy Inc., and would effectively shut such firms out of capital markets. He warned that continued depreciation could precipitate “catastrophic consequences,” spreading into broader markets and triggering a “collateral death spiral” in tokenized metal futures.

The warning coincided with renewed weakness in Bitcoin on Tuesday, when the cryptocurrency briefly fell below USD 73,000, erasing gains accumulated since November 2024. From its early‑October record high, Bitcoin has declined by more than 40 percent.

Despite Burry’s concerns, the overall crypto market remains relatively modest in scale, which reduces the likelihood of systemic contagion. Bitcoin’s market capitalization stands below USD 1.5 trillion, household exposure is limited, and corporate adoption remains narrow, suggesting any wealth‑effect transmission may be contained.

Burry emphasized that Bitcoin has not responded to conventional macro drivers such as a weakening dollar or geopolitical risk in the way gold and silver have, with the latter reaching record highs amid dollar‑depreciation concerns. He asserted that Bitcoin lacks an organic use case that would arrest or reverse its decline. Analysts cited by Bloomberg attribute the sell‑off to a combination of evaporating inflows, reduced liquidity and diminished macro appeal, while some crypto native traders have shifted toward event‑driven markets.

Burry highlighted the pressure on corporate treasuries that hold Bitcoin, noting that nearly 200 publicly listed companies report Bitcoin on their balance sheets. Inventory assets must be marked to market and reflected in financial statements; continued price declines would prompt risk managers to recommend disposals. He singled out Strategy Inc. as particularly vulnerable, warning that a further 10 percent fall would generate multibillion‑dollar write‑downs and effectively close access to capital markets for such a firm.

The emergence of spot Bitcoin ETFs has, in Burry’s view, intensified speculative dynamics and increased correlation with equities. He observed that Bitcoin’s correlation with the S&P 500 recently approached 0.50 and noted that ETFs recorded several of the largest single‑day outflows since late November, including three significant outflows in the final ten days of January. This pattern, he argued, signals weakening institutional conviction and raises the risk that ETFs could accelerate selling during market stress.

Burry further warned that crypto losses are already transmitting into other markets. He suggested that declines in tokenized gold and silver futures—contracts not backed by physical metal—have been partly driven by liquidations as corporate treasurers and speculators reduce exposure, a process that could overwhelm physical markets and produce a “collateral death spiral.” He estimated that up to USD 1 billion of precious‑metal positions were liquidated at month‑end amid falling crypto prices and cautioned that a drop of Bitcoin to USD 50,000 could force miner bankruptcies and collapse tokenized metal futures into a buyerless void.

Some market observers counter that prior crypto collapses, from Terra to FTX, did not infect traditional markets, and that regulatory clarity and lower valuations could support a recovery. Nonetheless, Burry’s analysis underscores the systemic vulnerabilities associated with corporate adoption of Bitcoin as a treasury asset.