Investor Michael Burry has warned of a potential “death spiral” in financial markets after silver liquidations exceeded those seen in bitcoin, highlighting risks from leverage and forced selling.
Michael Burry, the hedge fund manager made famous by The Big Short, has issued a stark warning about mounting stress across global markets, arguing that liquidations in silver markets have overtaken those in bitcoin — a signal he believes points to deeper structural fragility rather than isolated volatility.
Burry, who runs Scion Asset Management, described the pattern as a potential “death spiral”, where forced selling, leverage unwinds, and margin calls reinforce one another across asset classes. While cryptocurrencies have long been associated with extreme swings, Burry’s concern lies in the fact that similar dynamics are now emerging in traditionally “safer” markets such as precious metals.
Why silver matters more than crypto in this context
Bitcoin has experienced repeated liquidation cycles since becoming a mainstream speculative asset. What caught Burry’s attention, however, was that silver — a market central to industrial demand, hedging strategies, and institutional portfolios — is now seeing heavier forced selling than bitcoin.
Silver futures are widely used by:
- Industrial manufacturers
- Hedge funds and commodity traders
- Macro investors hedging inflation or currency risk
When liquidations accelerate in such a market, it often reflects stress in leveraged positions, rather than retail speculation alone.
According to Burry, this suggests that financial pressure is spreading beyond high-risk corners of the market into areas traditionally viewed as stabilising forces.
Leverage, margin calls, and the mechanics of a spiral
At the core of Burry’s warning is leverage. In both commodities and crypto markets, traders often use borrowed capital to amplify returns. When prices move sharply against those positions, margin requirements rise, forcing traders to either post more collateral or liquidate positions.
This dynamic can trigger a feedback loop:
- Prices fall
- Margin calls increase
- Forced liquidations push prices lower
- New margin calls follow
In bitcoin, such cycles are well-documented. In silver, they are less common — and therefore more alarming to macro-focused investors.
Burry’s use of the term “death spiral” reflects concern that multiple markets could reinforce one another’s declines, rather than absorbing shocks independently.
Bitcoin’s role as a volatility benchmark
Bitcoin has increasingly become a benchmark for speculative excess. Large liquidation events in crypto derivatives markets are closely watched as indicators of risk appetite.
That silver liquidations have surpassed bitcoin’s in scale suggests, in Burry’s view, that risk aversion is no longer contained to speculative assets. Instead, it may be spilling into assets tied to global growth, manufacturing demand, and monetary hedging.
For crypto markets, the comparison also highlights how deeply integrated they have become with broader financial conditions. Bitcoin is no longer an isolated experiment; it moves alongside equities, bonds, and commodities during periods of stress.
Macro pressures building simultaneously
Burry’s warning comes against a backdrop of tightening financial conditions globally. Higher interest rates, persistent inflation concerns, and geopolitical uncertainty have all contributed to thinner liquidity across markets.
When liquidity dries up, even modest sell-offs can cascade into large liquidation events. Commodities, often traded with significant leverage, are especially vulnerable in such environments.
The silver market’s reaction may therefore reflect macro stress rather than commodity-specific fundamentals.
How markets are reacting
So far, broader markets have shown resilience, but volatility has increased. Crypto traders are watching closely for signs that bitcoin could face another wave of forced selling if macro pressures intensify further.
In commodities, analysts are reassessing positioning data to determine whether silver’s sell-off represents:
- Temporary deleveraging
- A shift in industrial demand expectations
- Or a warning of deeper financial strain
Burry’s comments have added to a growing chorus of macro investors urging caution, particularly around highly leveraged strategies.
Burry’s track record — and limits
Michael Burry’s reputation lends weight to his warnings, but his track record is also marked by frequent, early calls that do not always play out on expected timelines.
Markets have, in the past, remained buoyant far longer than bearish investors anticipated. Still, Burry’s focus on leverage and forced selling has proven prescient in previous cycles, particularly during periods of systemic stress.
What to watch next
Key indicators in the coming weeks include:
- Further liquidation data across commodities and crypto
- Changes in margin requirements by exchanges
- Central bank signals on liquidity and rates
If silver continues to see outsized liquidations relative to bitcoin, it would reinforce concerns that stress is broadening rather than dissipating.
For now, Burry’s warning serves less as a prediction of imminent collapse and more as a signal flare: leverage remains high, liquidity is fragile, and markets may be more interconnected — and vulnerable — than surface-level price action suggests.
