Spot Bitcoin ETFs are seeing heavy outflows, and correlation with the S&P 500 is rising toward 0.50, increasing liquidation risk.
Bitcoin is on an epic crash right now, having lost 40% of its value since October, and Michael Burry (the investor behind the famous housing market short in 2008) is no warning that this dip could turn into a full-blown collapse.
This guy is calling it a “death spiral.” Companies that loaded up on Bitcoin over the past year could be in serious trouble.
In a post on Monday, Burry said Bitcoin is a speculative bet, not a real hedge like gold or silver. He pointed out that while precious metals soared on fears about the dollar, Bitcoin did nothing. And now, if it falls another 10%, he says Strategy, the biggest corporate holder of Bitcoin, would be deep in the red and could lose access to funding. He also said miners would be next to break.
Bitcoin dropped under $73,000 on Tuesday, hitting its lowest level since Donald Trump returned to the White House in 2025. Some analysts blame the fall on weak flows, poor liquidity, and fading interest. Others say crypto traders are shifting toward betting markets instead of sticking with coins.
But Burry thinks this isn’t just a blip. He said Bitcoin has no reason to stop falling. Even with adoption from corporate treasuries and new exchange-traded funds, the price hasn’t found support.
He warned that nearly 200 public companies holding Bitcoin are now at risk. Once their accountants mark down those holdings, the pressure to sell will get worse.
“There is no organic use case reason for Bitcoin to slow or stop its descent,” Burry wrote. And when Bitcoin keeps dropping, he said CFOs will tell their teams to get out.
Treasuries aren’t long-term bets. They get marked to market. When Bitcoin tanks, it hits financial reports directly. Burry said risk managers won’t sit around and hope. They’ll cut.
He also pointed to the surge in spot Bitcoin ETFs. Instead of helping, he says they’ve made Bitcoin even more speculative.
He said the ETFs have raised Bitcoin’s ties to the stock market, and the coin’s correlation with the S&P 500 has now reached around 0.50. That means if stocks fall, Bitcoin could fall harder.
Burry noted that ETFs have seen some of their worst daily outflows since November. Three big ones happened just in the last ten days of January. That’s not small money leaving. It’s investors giving up.
He also said crypto is leaking into other markets. Even though Bitcoin’s market cap is under $1.5 trillion, and household exposure is low, the impact is spreading. To cover losses, traders are dumping other assets, especially tokenized gold and silver futures.
Those contracts aren’t backed by real metal. When they get sold off in bulk, they pull down the real metals market too.
Burry said this creates what he called a “collateral death spiral.” At the end of last month, he estimated that up to $1 billion in precious metals was liquidated just because of falling crypto prices.
If Bitcoin falls to $50,000, Burry said miners would go broke and tokenized futures would crash with no one left to buy them. He blamed recent losses in gold and silver directly on crypto-linked selling. “Sickening scenarios have now come within reach,” he wrote.
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