Michael Burry warns of a domino effect: Bitcoin losses could put pressure on precious metals markets

The legendary investor Michael Burry, whose predictions about the 2008 financial crisis made history, is warning once again about dangerous market dynamics. This time, his focus is on a potential domino effect between cryptocurrencies and traditional safe-haven assets. With Bitcoin currently around $66,570 and down 2.54% in 24 hours, Burry signals warning signs of a much bigger problem: forced liquidations of gold and silver holdings by institutional actors.

In a Substack post, Burry explained his analysis that the massive decline in cryptocurrencies is pushing institutional investors and corporate treasurers into a precarious situation. To offset their crypto losses, these actors may be forced to liquidate profitable positions in other assets—particularly gold and silver.

The cascade effects of falling crypto prices

Burry estimates potential gold and silver sales could reach up to one billion dollars. His observation refers to price movements at the end of January, when gold and silver came under pressure shortly after crypto markets crashed. The investor suspects a deliberate strategy behind this: speculators and treasury managers might be intentionally selling profitable holdings in tokenized gold and silver futures to reduce their risk exposure.

This dynamic reveals a deeper structural problem. When asset allocations across multiple classes are interconnected, losses in one sphere can trigger sell-offs in others. Michael Burry sees Bitcoin as a catalyst for such market shocks.

Why institutional investors are under pressure

The recent collapse of Bitcoin below $73,000 represents a roughly 40% decline from recent highs. Companies like MicroStrategy (MSTR), which hold substantial Bitcoin reserves, see their balance sheets eroding. Burry warns that if Bitcoin drops further to $50,000, mining companies could face bankruptcy.

What Burry criticizes most: there is no fundamental economic activity that could support Bitcoin at higher prices. “There is no organic use case that could slow down or halt Bitcoin’s decline,” the investor states clearly. This means the downward movement could be self-reinforcing—losses lead to further selling, which in turn causes more losses.

Bitcoin as a safe haven – Burry sees fundamental weaknesses

A key point in Michael Burry’s critique is his statement that Bitcoin has failed as a digital counterpart to gold. While gold has functioned as a store of value for millennia, Burry argues that Bitcoin lacks a lasting foundation for stability. Corporate or institutional treasury holdings are speculative positions, not structural anchors for price stability.

The recent bull market for Bitcoin was primarily driven by the introduction of spot ETFs and institutional interest. However, Burry categorizes these factors as temporary and not indicative of genuine, broad market acceptance. From his perspective, Bitcoin remains a highly speculative instrument without intrinsic value or universal utility.

Market implications and the role of futures markets

Burry’s warning about tokenized metal futures markets is particularly interesting. If Bitcoin continues to fall and this sell-off in precious metals escalates, the market for these derivatives could “collapse into a black hole without buyers.” This would mean liquidity could dry up—just when sellers need buyers most.

These scenarios demonstrate how modern financial markets, with their complex interconnections, are more vulnerable to shockwaves. A decline in one segment can quickly trigger turbulence across entirely different asset classes.

Why Burry’s warning should be taken seriously

Michael Burry has proven to be a reliable early warning indicator. His 2008 analysis was not coincidental—it was based on thorough data analysis and an understanding of systemic risks. Today, he is once again raising uncomfortable questions that could unsettle investors with significant crypto holdings.

For investors engaged in crypto, the core message is clear: risks are not limited to Bitcoin itself but extend to markets overall. Burry’s warning highlights that another price plunge in Bitcoin could trigger a domino effect across traditional and modern asset classes—potentially leading to unpredictable consequences for portfolios holding these assets.