Big Short Michael Burry: Bitcoin Crash Could Trigger a "Collateral Death Spiral" That Drags Down Gold and Silver Markets

“Big Short” Michael Burry Issues Warning: Bitcoin Breaking Key Levels Will Force Institutions to Sell Gold and Silver, Triggering a Chain Reaction Financial Disaster.
(Background recap: After shorting AI and losing everything, Burry still refuses to admit defeat, saying “I’m still active in the market,” and predicts a major event on 11/25)
(Additional context: From big short to big squeeze! Michael Burry dissolves his fund, predicting the AI bubble will burst and lead to total losses)

Table of Contents

• Bitcoin Breaks Key Support, Market Confidence Shaken
• Precious Metals Market Faces Contagion Risks
• Mining Companies Face Bankruptcy Risks
• How Investors Should Respond

The legendary investor Michael Burry, who accurately shorted the subprime mortgage market before the 2008 financial crisis and was the inspiration for the movie “The Big Short,” has recently issued a stern warning about the cryptocurrency market.

He predicts that continued declines in Bitcoin could trigger a chain reaction, forcing institutional investors and corporate finance officers to sell up to $1 billion worth of gold and silver holdings to cover crypto losses.

Bitcoin Breaks Key Support, Market Confidence Shaken

Bitcoin is currently trading around $76,426, down over 40% from its peak last year, breaking the important psychological level of $80,000. Burry believes this downturn exposes fundamental weaknesses in Bitcoin as a digital asset.

He bluntly states that Bitcoin lacks “organic practical use” to support its value, so when prices fall, there’s no substantial reason to prevent its continued decline. This commentary is undoubtedly a direct challenge to the narrative of “digital gold” that has been promoted in the crypto space over the past few years.

Precious Metals Market Faces Contagion Risks

Burry’s analysis extends beyond the crypto market. He warns that when institutional investors suffer significant losses in Bitcoin, they may be forced to sell their precious metal assets to maintain overall portfolio balance and meet liquidity needs.

This passive selling could create a vicious cycle: Bitcoin declines lead to gold and silver sales, which in turn lower precious metal prices and further undermine market confidence, potentially evolving into a systemic risk event across asset classes.

Mining Companies Face Bankruptcy Risks

Beyond investor risks, Burry highlights potential crises in the Bitcoin mining industry. If Bitcoin prices further decline to $50,000, many mining companies could face bankruptcy.

We know that Bitcoin mining requires substantial investments in electricity and hardware. When the coin’s price drops below miners’ break-even point, they may have to shut down or sell assets, which would further intensify market selling pressure and create another negative feedback loop.

How Investors Should Respond

For investors holding cryptocurrencies or precious metals, Burry’s warning offers an opportunity to reassess their portfolios. Whether or not you agree with his views, understanding the correlation and potential contagion pathways between different asset classes is a key skill for mature investors.

During turbulent market periods, staying calm, diversifying risk, and maintaining sufficient liquidity buffers may be more pragmatic strategies than trying to predict market bottoms. After all, even legendary investors like Burry cannot precisely forecast every market turning point: all they can do is identify risks and adjust their positions accordingly.