Famed investor Michael Burry has warned about the broader market impacts that could occur as Bitcoin’s (BTC) price continues its downward spiral.
In a post on Substack, Burry warns that Bitcoin’s plunge could become a self-reinforcing “death spiral” and hurt publicly traded companies that have stockpiled the largest cryptocurrency.
Burry’s bet against the U.S. subprime mortgage market was chronicled in the book and movie “The Big Short.”
Now a market commentator, Burry argues that Bitcoin remains a purely speculative asset and has failed to take off as a debasement hedge similar to precious metals such as gold.
Further losses in Bitcoin’s price could strain the balance sheets of major holders such as Strategy (MSTR), force selling across the crypto ecosystem, and trigger widespread destruction.
“Sickening scenarios have now come within reach,” Burry writes on Substack.
Should Bitcoin fall another 10%, Strategy, the world’s largest corporate crypto treasury, would be billions in the red and “find capital markets essentially closed” to it, writes the investor.
Burry adds that some Bitcoin miners could be pushed towards bankruptcy if the current decline in BTC worsens.
The warning from Michael Burry comes as Bitcoin’s price fell below $73,000 U.S. on Feb. 3, its lowest level in 15 months.
The current selloff is raising concerns as Bitcoin has failed to respond to typical catalysts such as U.S. dollar weakness and geopolitical risks. There has also been little dip buying by investors
“There is no organic use case reason for Bitcoin to slow or stop its descent,” writes Burry.
However, the investor concludes his Substack post by saying that there is little risk of wider market contagion due to Bitcoin’s collapse.
Bitcoin’s $1.5 trillion U.S. market value, limited household exposure, and narrow corporate holdings suggest that the wealth destruction is likely to be contained to mostly individual investors and specialty crypto firms.
Bitcoin’s price is currently at $75,000 U.S., having fallen 40% from an all-time high of $126,000 U.S. last October.
