Michael Burry Warns of Crypto Death Spiral

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•  04 Feb 2026
 

The man who famously predicted the 2008 housing market collapse is sounding the alarm once again, and this time, his sights are set squarely on the world’s largest digital asset. Michael Burry, the legendary hedge fund manager portrayed in The Big Short, is warning investors that the recent slump in Bitcoin isn’t just a routine correction it’s the beginning of a potential financial death spiral that could reshape the entire crypto ecosystem.

Since its peak last October, Bitcoin has shed roughly 40% of its value, recently sliding below the $73,000 mark. While die-hard enthusiasts view this as a buying opportunity, Burry sees a structural failure. For years, the narrative pushed by advocates was that Bitcoin would serve as digital gold, a reliable hedge against dollar inflation and geopolitical instability. However, as global tensions rise and the dollar fluctuates, Bitcoin has done the opposite of gold. It has behaved like a high-risk speculative asset, moving in lockstep with tech stocks rather than acting as a safe haven.

The real danger, according to Burry, lies in the corporate balance sheets that have become tethered to Bitcoin price. He points to MicroStrategy as the ultimate canary in the coal mine. As the world’s largest corporate holder of Bitcoin, the company is now reportedly seeing the asset trade below its average purchase price. Burry suggests that just another 10% drop in Bitcoin value could trigger a catastrophic accounting loss for the firm, potentially locking it out of capital markets as lender confidence evaporates.

When a company uses Bitcoin as a treasury asset, it’s not just a passive investment; it’s a liability waiting to happen. If prices continue to slide, boards of directors and risk managers may move from holding to forced selling to protect what’s left of their capital. This creates a feedback loop: lower prices force corporate liquidations, which drive prices even lower.

The pain doesn't stop with corporate treasuries. Burry is also flagging a looming crisis for Bitcoin miners. As the price drops, the cost of energy and hardware remains high, making operations unprofitable for many. If miners are forced to shut down or dump their holdings to cover operational costs, the selling pressure becomes relentless. Unlike traditional assets, Burry argues that Bitcoin lacks an organic economic use to provide a price floor. There is no fundamental demand like industrial use for silver or dividends for stocks to stop the bleeding once the speculative fever breaks.

While the broader financial system might be insulated from a total crypto meltdown due to limited bank exposure, the psychological shift is already happening. Large outflows from Bitcoin ETFs suggest that institutional paper hands are starting to exit. For the retail trader, the message from Burry is clear: the safety net you thought was there might actually be a tightrope.

If Bitcoin continues its descent toward $50,000, we may witness a slow-motion collapse of liquidity and trust that no buy the dip tweet can fix.

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