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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After testing record highs earlier in the week, copper retreated sharply as technical disruptions at the London Metal Exchange (LME) coincided with position shifts by Chinese traders. Three-month copper contracts fell nearly 4% from above $14,500 per ton to around $13,000. Over the same period, gold declined about 4%, while silver dropped 5.9%.

Metal Sell-Off Spills Into Crypto

The correction in traditional markets quickly reverberated across crypto, particularly in tokenized gold, silver, and copper products. Over the past 24 hours, positions tied to these assets across spot and derivatives markets saw close to $120 million in liquidations.

Silver-linked contracts accounted for the largest losses at roughly $32 million, followed by gold- and copper-based futures. Prices of tokenized bullion products such as XAU and XAUT fell by more than 7%.

This episode underscores that crypto markets are no longer just a standalone asset class, but increasingly serve as an alternative venue for macro trading.

Crypto as a New Channel for Macro Trades

As metal prices surged earlier in the week, traders gravitated toward crypto-based contracts, drawn by 24/7 access, leverage, and faster execution. When prices reversed, those same markets became a pressure valve for risk.

Gold’s pullback went beyond a routine technical correction. Spot gold slid to around $5,170 after intraday losses exceeded 5%, coming just one day after prices hit an all-time high of $5,594.82. Futures markets mirrored the move, with U.S. February contracts falling to $5,225, as selling pressure also spread to tokenized metal positions in crypto markets.

The post-record correction was even more pronounced in silver. After breaking above $122 on Thursday, prices retreated to around $112 amid heavy selling. Still, silver continues to stand out with gains of more than 50% on a monthly basis.

Platinum followed a similar pattern, easing toward the $2,530 area after topping $2,900 earlier in the week at a record high.

Altogether, the move reinforced how tightly linked crypto markets have become with traditional finance.

Stronger Dollar Adds Pressure

A stronger U.S. dollar also played a key role in the metals pullback. Speculation that the Trump administration may be preparing to nominate Kevin Warsh as the next Federal Reserve chair boosted the greenback. Dollar strength tends to weigh on dollar-denominated commodities, and Friday’s move pressured metals broadly.

Beyond gold and silver, crude oil and iron ore prices also moved lower in this environment.

Bigger Picture: Metals Still a Leading Theme

Despite the sharp short-term correction, metals remain one of the strongest themes of the year. Copper continues to benefit from supply constraints and electrification-driven demand, keeping weekly momentum intact. Gold, meanwhile, continues to attract investor interest as a hedge against political and fiscal uncertainty.

Bitcoin, however, told a different story. BTC traded relatively independently despite the turbulence in metals, reinforcing the view that it is increasingly behaving as a standalone risk asset rather than a macro proxy.

Crypto markets may no longer be detached from global trends—but they are increasingly acting as a parallel arena where macro forces play out in real time.

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The post What Changed in Gold and Silver? Sharp Sell-Off Begins appeared first on Coin Engineer.