“Big Short” investor Michael Burry warned that Bitcoin (CRYPTO: BTC) has been exposed as purely speculative with “no organic use case reason to slow or stop its descent,” as BTC wiped out all post-election gains.
Burry’s Cascade Warning
Burry argued on Monday that Bitcoin failed to establish itself as a debasement hedge similar to precious metals, contradicting the argument that its fixed supply makes it comparable to gold.
“Sickening scenarios have now come within reach,” Burry wrote, warning that if Bitcoin falls another 10% from Monday’s levels, Strategy (NASDAQ:MSTR) will be billions in the red with capital markets essentially closed.
Unlike gold and silver, which surged to record highs amid rising geopolitical tensions and fears of dollar debasement, Bitcoin did not react to the usual safe-haven catalysts such as a weaker dollar or heightened global risk.
The Corporate Treasury Risk
Burry noted nearly 200 public companies hold Bitcoin, but warned “there is nothing permanent about treasury assets.”
Companies must mark these assets to market and include them in financial reporting.
If prices continue falling, risk managers will advise companies to sell, Burry warned.
The advent of spot ETFs inflamed Bitcoin’s speculative nature while increasing correlation with stock markets—now approaching 0.50 with the S&P 500.
Adding pressure, Bitcoin ETFs notched some of their biggest single-day outflows since late November, with three occurring in the last 10 days of January.
The Precious Metals Connection
Burry cited Bitcoin’s fall as partly responsible for gold and silver’s recent collapse.
Corporate treasurers and speculators needed to de-risk by selling profitable positions in tokenized gold and silver futures.
Physical metals don’t back these tokenized futures, and they can overwhelm trading, causing “a collateral death spiral.”
Burry estimated traders liquidated up to $1 billion in precious metals at month’s end due to falling crypto prices.
If Bitcoin falls to $50,000, miners go bankrupt while tokenized metals futures “collapse into a black hole with no buyer.”
The Technical Setup
Bitcoin is testing critical $75,000-$76,000 support.
The Supertrend indicator sits at $86,874 in bearish mode, while the Parabolic SAR at $81,896 acts as dynamic resistance.
If support fails, next meaningful support doesn’t appear until $72,000 or potentially $68,000.
Meanwhile, any bounce faces resistance at $81,896, then $86,874.
Image: Shutterstock
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