The tokenized version of silver has circulated more violently than bitcoin, resulting in large losses for its holders. Hedge fund manager Michael Burry, of “The Big Short” fame, sees this as a vicious cycle in which falling prices force liquidations, sinking him further.
Burry pointed out the same dynamic in a note this week, characterizing it as a “collateral death spiral” in which falling cryptocurrency prices and heavy leverage triggered selloffs in tokenized metals and digital assets.
Burry said silver liquidations exceeded those of bitcoin in at least one crypto venue during the easing.
“The very high leverage on these cryptocurrency exchanges due to rising metal prices meant that as cryptocurrency collateral fell, the tokenized metals had to be sold,” he said. “This is a collateral death spiral.”
“It was reported that tokenized silver futures liquidations actually exceeded Bitcoin liquidations in a crypto market called, ironically, Hyperliquid,” Burry added.
That reversal was driven less by anything specific to bitcoin than by the rapid movement of positioning in metals, where a sharp pullback collided with crowded leverage and thin liquidity.
At the peak of the move, tokenized silver futures recorded one of the biggest declines in crypto markets, outperforming usual leaders bitcoin and ether.
Tokenized metals contracts allow traders to place directional bets on gold, silver and copper using crypto-native platforms instead of traditional futures accounts.
These products trade 24 hours a day and often require less initial capital, which can make them attractive in volatile conditions. But that same setup can accelerate forced selling when prices move against crowded trading.
As metals plunged, leveraged long positions were forced to unwind. Liquidations increased when traders failed to meet margin requirements or saw platforms automatically close positions.
On Hyperliquid, one of the most active venues for these instruments, liquidations linked to silver briefly surpassed those of bitcoin, a rare moment when a macro contract, not BTC, became the main driver of forced selling.
The move also came as traditional markets tightened risk parameters.
CME Group raised margin requirements for gold and silver futures, increasing collateral demands and putting pressure on leveraged traders to add capital or reduce exposure.
While those margin changes apply to CME contracts, traders say changes in positioning and risk appetite can quickly spread to tokenized markets that reflect the same underlying assets.
The broader conclusion is that crypto venues are no longer used just for crypto. They are increasingly becoming alternative avenues for macro trading, and in stressful situations, that can change the settlement situation in ways traders don’t expect.
