Investor Michael Varley, who predicted the 2008 financial crisis, warned on Monday that a sharp decline in Bitcoin could trigger a chain of forced sales across multiple asset classes.
With Bitcoin down 40% from October highs and altcoins plummeting 20-40% since January’s FOMC meeting, the question dominating crypto markets is whether a full-fledged crypto winter has arrived.
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Michael Burley warns BTC could reach $50,000
In a post on Substack, the “Big Short” investor estimated that up to $1 billion in precious metals was liquidated at the end of January as institutional investors and corporate treasurers scrambled to cover crypto losses.
“There is no organic use case reason to slow or stop Bitcoin’s decline,” Varley wrote. He warned that if Bitcoin falls to $50,000, mining companies could face bankruptcy and the tokenized metals futures market could “collapse into a black hole with no buyers.”
Bitcoin briefly hit $73,000 on Tuesday, down 40% from its October peak of more than $126,000. Burley argued that cryptocurrencies have not lived up to their promise as digital safe havens or gold substitutes, and dismissed recent ETF gains as speculative rather than evidence of permanent adoption.
Strategy and BitMine: Unraveling the crypto asset model
Barry’s epidemic warnings are backed up by concrete evidence in the struggles of crypto companies. Bitcoin accumulation company Strategy Inc., led by Michael Saylor, is currently facing paper losses as BTC has fallen below its average purchase price of about $76,000. The company posted unrealized losses of $17.44 billion in the fourth quarter alone.
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Strategy’s market capitalization plummeted from $128 billion in July to $40 billion, a 61% drop from Bitcoin’s October high. The company’s mNAV (corporate value divided by the value of its cryptocurrency holdings) has fallen from just over two a year ago to 1.1, approaching a critical point that could force it to sell its tokens.
The strategy increases the likelihood of selling shares if mNAV falls below 1, marking a shift from Saylor’s long-standing never-sell stance. The company raised $1.44 billion through a stock sale to ensure it can meet future dividend and debt payments.
Bitmine Immersion Technologies, backed by Peter Thiel and chaired by Fundstrat’s Tom Lee, is facing even bigger losses. The Ethereum aggregator holds 4.3 million ETH purchased at an average price of $3,826 and is currently worth about $2,300, which equates to more than $6 billion in unrealized losses.
Analysts warn that crypto finance companies are trapped in their own narratives. A sale, even a small one, would send a devastating signal that could cause both the company’s stock and the underlying tokens to plummet, more than the sale itself helps.
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Technical analysis points to extension of downtrend
Hiroyuki Kato, a Japanese analyst at CXR Engineering, warned that the cryptocurrency market may have entered a long-term downward trend. Bitcoin fell below its November lows, triggering a shift from a buy-on-the-moment strategy to a short-selling strategy.
The decline accelerated after Ethereum broke through a key support level of 400,000 yen ($2,600), with altcoins overall falling 20-40% since the January FOMC meeting. Kato pointed out that the weekly chart shows that the head-and-shoulders pattern is approaching a neckline, and if it breaks, short-term recovery will be structurally difficult.
“High volatility in cryptocurrencies and precious metals ahead of the broader stock market could be a canary in the coal mine,” Kato wrote, suggesting a risk-off stance until the situation stabilizes.
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Not a crypto winter, but a new paradigm
Despite the bearish signals, Tiger Research argues that this downturn is fundamentally different from previous crypto winters. This past winter, the Mt. Gox hack in 2014, the ICO bust in 2018, and the Terra-FTX collapse in 2022 all stemmed from failures within the industry that destroyed trust and drained talent.
“Humans did not create spring, so there is no winter,” the report states. Both the 2024 rally and the current decline were driven by external factors such as ETF approvals, tariff policy, and interest rate expectations.
More importantly, after regulation, the market was divided into three tiers. Regulated zones with limited volatility, unregulated zones for high-risk speculation, and shared infrastructure such as stablecoins that serve both. The trickle-down effect that once lifted all tokens when Bitcoin rose has disappeared. The ETF’s capital stays in Bitcoin and does not flow into altcoins.
“We are unlikely to see another crypto season where everything goes up all at once,” Tiger Research concluded. “The next bull market will come, but it won’t come for everyone.”
For this bull market to materialize, two conditions must occur. It’s the killer use cases emerging from the unregulated zone and the supporting macroeconomic environment. Until then, the market is in an unprecedented state: neither winter nor spring, but a completely new state.
