The familiar dynamic is back: falling crypto collateral is forcing metals into mandatory liquidation.

Hedge fund manager Michael Burry’s warning earlier this week about a “collateral-driven feedback loop” is now playing out in real time.

Forced Liquidations on Hyperliquid Accelerate the Selloff

Pressure in tokenized silver concentrated heavily on Hyperliquid. Roughly $17.75 million in XYZ:SILVER positions were forcibly closed, with $16.82 million coming from long positions.

The data highlights how leverage magnifies price moves. As silver slid, margin calls kicked in. Liquidations triggered fresh selling. On-chain metrics show the unwind hit metals harder than crypto.

A two-day rebound was completely erased, and silver still struggles to establish a durable bottom after last week’s historic collapse.

“Crypto Falls, Metals Get Sold”

Burry described the mechanism in simple but devastating terms: when crypto assets lose value, collateral gaps emerge. Traders are then forced to close profitable metal positions to cover margins. He labeled this process a “collateral death spiral.”

He specifically warned that bitcoin losses could push institutions to liquidate tokenized silver and other metal exposure. Recent price action suggests that scenario has already moved beyond theory.

Market participants say the drop fits a recurring pattern: investors chase short-term rebounds, then rapidly unwind positions once volatility returns.

Spot Prices Reveal the Scale of the Selloff

Spot gold traded around $4,838.81 per ounce, down 2.5% on the day, retreating sharply from an early-session one-week high.

Silver fell far harder. The metal dropped 14.9% to $74.94 per ounce. After hitting a record $121.64 last week, the reversal intensified the unwinding of leveraged positions.

Positioning Overtakes Macro Forces

Under normal conditions, markets would focus on the dollar hitting a two-week high and signs of easing US–China trade tensions. Indeed, gold and silver sank sharply during Thursday’s broader market selloff. But this time, positioning and forced selling dominate price action.

While investors digest the potential policy implications of Kevin Warsh’s Fed nomination and President Donald Trump pushes back against a more hawkish Federal Reserve, these headlines have had limited impact on metals.

The real pressure comes not from “clean” macro buying that fueled last month’s rally, but from leveraged positions being unwound.

Some traders warn liquidation leaderboards could briefly flip, with metal products suffering deeper losses than bitcoin itself.

Markets are searching for balance rather than direction. But as long as crypto collateral remains fragile, vulnerability in tokenized metals is likely to persist.

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