Michael Burry, who gained fame for shorting the U.S. housing market before the 2008 financial crisis, has issued a warning that Bitcoin's sharp decline could evolve into a self-reinforcing "death spiral," inflicting lasting damage on corporations that aggressively accumulated the cryptocurrency over the past year.
In a Substack blog post on Monday, Burry stated that since peaking in October, the pioneering cryptocurrency has dropped 40%, revealing its nature as a purely speculative asset that has failed to function as a hedge against currency devaluation like precious metals. He argued that if Bitcoin's price continues to fall, it could rapidly impair the balance sheets of major holders, forcing sell-offs across the entire crypto ecosystem and potentially triggering massive value destruction.
Burry wrote, "A troubling scenario is now imminent." He suggested that a further 10% decline could see MicroStrategy Inc., the world's largest corporate treasury holder of crypto assets, facing billions in losses with "capital markets largely closed to it." He added that steeper declines might push Bitcoin mining companies into bankruptcy.
These comments emerged as Bitcoin fell below $73,000 on Tuesday, hitting its lowest level since Donald Trump re-entered the White House over a year ago. Analysts offered various explanations for the slump, including slowing fund inflows, deteriorating liquidity, and reduced macroeconomic appeal. With the rise of prediction markets, many crypto traders have also cooled on cryptocurrency economics, shifting their focus to event betting.
Unlike gold and silver, which have surged to record highs amid global tensions and concerns about dollar devaluation, Bitcoin has failed to respond to typical drivers such as a weaker U.S. dollar and geopolitical risks.
Burry wrote, "Bitcoin lacks any intrinsic utility value that would support a halt or reversal in its decline."
He indicated that neither corporate treasury holdings of the token nor the newly launched spot crypto exchange-traded funds (ETFs) can indefinitely prop up its price or prevent catastrophic outcomes during a significant downturn. He noted that nearly 200 publicly traded companies currently hold Bitcoin.
While this trend has expanded Bitcoin's demand, "treasury assets are not perpetual," he wrote.
Treasury assets must be marked to market and included in financial reports. Burry warned that if Bitcoin's price continues to drop, risk managers will begin advising companies to sell.
He added that the introduction of spot ETFs has instead amplified Bitcoin's speculative characteristics while increasing its correlation with equity markets. Data shows Bitcoin's correlation with the S&P 500 recently approached 0.50. Theoretically, forced liquidations would quickly commence as losing positions expand.
Burry also revealed that Bitcoin ETFs recently experienced their largest single-day outflows since late November, with three occurring in the final ten days of January.
However, despite Burry's risk warnings, the cryptocurrency market remains too small to cause widespread contagion. Bitcoin's $1.5 trillion market capitalization, limited household participation, and narrow corporate adoption suggest its wealth effect will likely be contained within a localized scope.
By some measures, the digital asset treasury bubble has already burst. Retail leverage has dried up, and past crypto collapses—from Terra to FTX—did not spill over into traditional markets. Bulls now argue that clearer regulatory policies and low valuations could serve as catalysts for a Bitcoin rebound.
MicroStrategy co-founder Michael Saylor emphasized that the company currently faces no immediate financial pressure. It is not subject to margin calls and does not anticipate being forced to sell Bitcoin. MicroStrategy has also raised $22.5 billion through stock offerings as a cash buffer, sufficient to cover interest payments and dividends for the next two years. However, if Bitcoin fails to rebound or investor demand for its stock diminishes, the company's maneuvering room will steadily shrink.
Meanwhile, several crypto mining firms have capitalized on the recent AI boom's demand for data center services, completing financing through public stock sales.
But as Bitcoin continues to fall below key price levels, Burry believes contagion could spread to broader markets. He pointed out that recent declines in gold and silver prices were partly due to corporate treasurers and speculators selling profitable tokenized metal futures positions to de-risk.
Burry stated that these tokenized metal futures are not backed by actual precious metals and their trading volume might far exceed that of physical metal, potentially triggering a "collateral death spiral."
"By month-end, up to $10 billion in precious metal assets faced forced liquidation due to crypto price declines," Burry wrote. Should Bitcoin fall to $50,000, mining companies would go bankrupt, and "tokenized metal futures would plunge into a black hole with no buyers."
