The tokenized version of silver has been flailing more wildly than bitcoin, resulting in huge losses for holders. Hedge fund manager Michael Burry, known for “The Big Short,” sees this as a vicious loop where falling prices force liquidations and drag it on further.
Burry pointed to the same dynamic in a note this week, characterizing it as a “collateral death spiral” where falling crypto prices and heavy leverage triggered liquidations in tokenized metals and digital assets.
Burry said silver liquidations outpaced bitcoin in at least one crypto venue during the relaxation.
“Sky-high leverage on these crypto exchanges due to rising metal prices meant that when crypto security fell, the tokenized metals had to be sold,” he said. “This is a death spiral.”
“It was reported that tokenized silver futures liquidations actually exceeded Bitcoin liquidations in a crypto market called, ironically, Hyperliquid,” Burry added.
This reversal was driven less by anything specific to bitcoin than by fast-moving positioning in metals, where a sharp pullback collided with crowded leverage and thin liquidity.
At the top of the move, tokenized silver futures logged one of the biggest wipeouts across crypto markets, overtaking the usual leaders bitcoin and ether.
Tokenized metal contracts let traders take directional bets on gold, silver and copper using crypto-native platforms rather than traditional futures accounts.
These products are traded around the clock and often require less upfront capital, which can make them attractive in volatile conditions. But the same setup can precipitate forced selling when prices move toward a crowded trade.
As metals tumbled, leveraged longs were forced to relax. Liquidations increased as traders either failed to meet margin requirements or saw positions automatically closed by platforms.
On Hyperliquid, one of the most active venues for these instruments, silver-linked liquidations briefly exceeded bitcoins — 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, increased collateral requirements and pressured leveraged traders to either add capital or reduce exposure.
While these margin changes apply to CME contracts, traders say changes in positioning and risk appetite can quickly spill over into tokenized markets that mirror the same underlying assets.
The broader takeaway is that crypto sites are no longer only used for crypto. They are increasingly becoming alternative tracks for macro trades – and in stress, that can turn the liquidation tables in ways traders don’t expect.
