Tokenized Silver Turmoil Triggers Crypto-Style Liquidation Spiral, Burry Warns

Tokenized silver has experienced extreme volatility in recent days, swinging more aggressively than bitcoin and causing significant losses for traders. According to hedge fund manager Michael Burry, famous for predicting the 2008 financial crisis, the sharp sell-off reflects a dangerous feedback loop driven by leverage, falling collateral values and forced liquidations across crypto platforms.

Burry described the situation as a “collateral death spiral,” where declining crypto prices reduce the value of collateral posted by traders, triggering margin calls and automatic liquidations. Those liquidations then push prices even lower, intensifying losses. In a recent note, he highlighted that on at least one crypto exchange, liquidations tied to tokenized silver futures actually exceeded those of bitcoin, an unusual development that underscores how macro assets are increasingly driving stress in crypto markets.

Tokenized metals allow traders to speculate on assets like silver, gold and copper using blockchain-based platforms rather than traditional futures markets. These contracts trade 24/7 and typically require lower upfront capital, making them attractive during periods of volatility. However, that accessibility often comes with high leverage and thinner liquidity, which can amplify losses when prices move sharply against crowded positions.

As silver prices pulled back, leveraged long positions were forced to unwind rapidly. On Hyperliquid, a major venue for tokenized metals trading, silver-related liquidations briefly surpassed bitcoin’s, marking a rare moment where a metals contract became the primary source of forced selling across the platform.

The turmoil also coincided with tighter risk controls in traditional markets. CME Group raised margin requirements for gold and silver futures, increasing collateral demands and pressuring traders to reduce exposure. Although CME rules do not directly apply to crypto platforms, shifts in sentiment and positioning tend to spill over quickly into tokenized markets that track the same underlying assets.

The episode highlights a broader shift in crypto’s role. Crypto exchanges are no longer used solely for digital assets but are increasingly acting as alternative rails for macro trading. In times of stress, that convergence can produce unexpected and severe liquidation events, reshaping risk across both crypto and traditional markets.