Gold prices reached record highs of over $5,545 per ounce in late January, but have since corrected to $5,179 per ounce as of Tuesday trading. Big Short’s Michael Burry thinks the major price correction of precious metals is due to the Bitcoin crash, as corporations had to de-risk by selling profitable positions in tokenised gold and silver futures.
Tokenised metal futures are not backed by physical metal and can overwhelm trading in the physical market. Burry had said in a recent post on X that this could cause ‘a collateral death spiral,’ adding that up to $1 billion in precious metals was liquidated by January end due to falling crypto prices.
Burry is known for netting $700 million from betting against the housing market during the 2008 financial crash, which was chronicled in the award-winning film ‘The Big Short.’ Since then, Burry’s notable investment decisions have also showcased strategic foresight. He invested in water assets, predicting future scarcity, and GameStop before it became a meme stock.
He has also wagered against Elon Musk’s Tesla, Cathie Wood’s Ark Innovation ETF, and BlackRock’s iShares Semiconductor ETF, which holds Nvidia among its top holdings. More recently, he placed put options against Nvidia and Palantir Technologies amid AI bubble fears.
Corporate Balance Sheet Stress From BTC Crash
Burry cautioned that if Bitcoin fell to $50,000, miners could go bankrupt, while ‘tokenised metals futures would collapse into a black hole with no buyer.’ He also said it would impact the balance sheets of companies like Strategy, which are rapidly accumulating Bitcoin despite continued volatility.
Meanwhile, Burry believes there is no organic use-case reason for Bitcoin to slow or stop its descent, adding that BTC adoption by nearly 200 public corporations and ETFs is not sufficient to drive prices up forever or to prevent major consequences if it declines considerably.
He added that spot crypto ETFs have only ramped up Bitcoin’s speculative nature, while increasing the token’s correlation with stock markets. He shared that BTC’s correlation with the S&P 500 has reached 0.50, and liquidations could be triggered when loss positions grow.
However, Michael Saylor’s Strategy disclosed buying 17,994 BTC for a whopping $1.28 billion over the last week. Strategy now holds 738,731 bitcoins valued at over $56 billion.
Burry’s $1M Profit From Gold Investments
In Q1 2024, Burry’s Scion Asset Management, which is now shuttered, purchased 440,729 shares of Sprott Physical Gold Trust for $7.6 million. However, the hedge fund offloaded the holdings a quarter later for a $1 million profit. If he maintained his position through 2025, profits could have been north of $18.5 million.
Burry invested in the gold trust instead of low-fee ETFs or gold mining stocks because the Sprott funds offer direct exposure to physical gold without the operational or regulatory challenges. The Sprott Gold Trust is a closed-end fund that provides investors with exposure to gold without the hassles of handling and storing physical gold.
Investors in the Sprott fund can purchase gold stored in secure vaults and redeem their units for physical gold, which is a unique feature most ETFs don’t offer.
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