BTC falls into the risk zone: Barry's warning of the death spiral mechanism

Bitcoin has been under continuous pressure over the past two weeks, with the current price touching $69,780, hitting a new low. Investment guru Michael Burry recently issued a sharp warning—corporate Bitcoin holders are facing a “death spiral” risk, bringing systemic risks in the crypto market back into focus. Burry emphasized that if Bitcoin drops another 10%, a chain reaction of forced liquidations could trigger a self-reinforcing downward spiral.

The Risk Logic Behind Burry’s “Death Spiral” Warning

Michael Burry is known for his precise shorting during the 2008 housing crisis. His warning this time is based on a seemingly simple but deadly logic: corporate Bitcoin holders have become a key support for the market. Once prices fall below a critical point, these institutional investors will face financing pressures and be forced to sell Bitcoin to maintain their account balances. Strategy, as the largest corporate Bitcoin holder, faces this risk acutely.

Burry pointed out that Bitcoin has not appreciated in value like gold and silver during the dollar devaluation environment; instead, it has continued to decline—weakening its narrative as a store of value. When expectations are shattered, holders begin to lose confidence, which is the trigger for a spiral decline.

The Mechanism of the Death Spiral: Why a Sharp Drop Can Trigger a Chain Reaction

The core of this risk lies in feedback loops. Selling by corporate holders not only directly depresses prices but also triggers retail investors to follow suit, further accelerating the decline. Each percentage point drop in price could trigger more stop-losses and liquidations, forming a self-reinforcing negative feedback spiral. Miners, small funds, and individual investors will one by one join the sell-off, each wave intensifying market confidence collapse.

Spot Market Data Reveals Ongoing Selling Pressure

According to the latest data from Coinglass, net outflows have persisted in the spot market over the past two weeks. This is not just a day or two of fluctuation but a systemic ongoing sell-off. When the market declines, traditional “buying the dip” strategies have not appeared—no large buy orders are absorbing the sell pressure; instead, there are continuous outflows. This pattern directly confirms Burry’s concern: holders are continuously reducing their positions rather than accumulating on dips.

The persistent spot outflows indicate market participants lack confidence in the future trend. If corporations and large investors truly believed this was a bottoming opportunity, they would be buying; their current behavior suggests they are de-risking.

Technical Outlook: Indicators Are Oversold but Rebound Is Weak

From the charts, Bitcoin’s daily technical indicators have entered extreme oversold territory. The RSI has fallen to 28.75, the lowest since November 2024, which typically signals a potential rebound. However, current attempts at a bounce are being suppressed by multiple moving averages.

The 20-day moving average is at $84,468, the 50-day at $88,280, and the 100- and 200-day moving averages are at $92,655 and $97,132 respectively. Bitcoin is currently far below these averages, forming a “moving average grid,” with the overall price structure showing sustained lows and even lower lows—a classic downtrend.

On the 2-hour chart, Bitcoin briefly dipped below the Bollinger Band lower band ($74,743), then quickly rebounded to $76,650 but was rejected at the 20-period simple moving average ($77,435). The Supertrend indicator remains bearish at $78,137, confirming the fragility of any short-term upward momentum.

Support Levels and Downside Risks

The recent support at $74,000 has gradually weakened. If this level is broken, attention will shift to $65,000—a major demand zone. If this zone also gives way, the market could face a more severe confidence crisis.

The upper Bollinger Band is at $80,126. For bulls, closing above this level is necessary to consider a reversal. Otherwise, any current rebound is merely a short-term pause within a downtrend.

Outlook: Spiral or Stabilization?

Optimistically, Bitcoin could confirm a bottom near $75,000, followed by a strong rebound that reclaims the 20-day moving average at $84,468. This would require stable corporate sentiment and spot buying—conditions currently absent.

Pessimistically, Burry’s theory could come true: a drop below $74,000 could force corporate and fund liquidations, igniting a death spiral that drives prices down to $65,000. Given ongoing spot outflows and balance sheet pressures, this risk is very real.

The key now is to monitor corporate holders’ actions and capital flows in the spot market. If a wave of liquidations begins, the downward spiral could accelerate faster than anyone expects.