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Michael Burry sounds alarm on what could happen if Bitcoin continues to slide
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In a Substack article, the “Big Short” investor outlined various consequences if BTC continues to sell off.
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Burry said that in a worst-case scenario, he sees cryptocurrency miners going bankrupt and metal prices plummeting.
Michael Burry warns that a new type of financial disaster could occur if Bitcoin doesn’t continue its plunge.
In a new post on Substack, the investor known as “The Big Short” pointed to the deepening of Bitcoin’s bear market and expressed his belief that if the cryptocurrency’s price continues to fall, there could be serious consequences.
His warning comes at a difficult time for Bitcoin investors. The cryptocurrency ended January with its fourth consecutive monthly decline, the coin’s longest losing streak since 2018. The coin is also down about 37% from last year’s peak.
Burry said the market is already seeing some consequences of Bitcoin’s plunge. The former fund manager said he believes last week’s collapse in gold and silver prices was partly due to Bitcoin’s decline, noting that the two assets are interconnected because metal futures contracts are not backed by the physical assets themselves, similar to how cryptocurrencies are tokenized.
“The sickening scenario is now within reach,” Burry said, outlining three other consequences he believes could occur if Bitcoin continues its free fall.
Here are three scenarios Bury sees:
Burry speculated that if Bitcoin fell below $70,000, the entire financial industry could suffer significant losses.
Michael Saylor’s iconic cryptocurrency vault Strategy could record losses of more than $4 billion and “find capital markets essentially shut down,” Burry said, suggesting the company won’t be able to raise more cash from investors.
He added that Bitcoin held by other institutions could suffer losses of 15%-20%, causing risk managers to “become more aggressive.”
Burry said the recent declines in gold and silver prices suggest that such a decline is likely for Bitcoin as well.
“These moves, if sustained, could lead to a move above $70,000, as portfolio margin accounts, tokenized metals futures, and crypto collateral are interconnected,” he wrote.
Burry said that if Bitcoin fell to $60,000, it could lead to an “existential crisis” for Saylor’s strategy, but he did not elaborate further.
