「The Big Short」 Burry Warns: Bitcoin to Drop Another 10%, Triggering Systemic Risk
Original Article Title: "‘Big Short’ Burry: Bitcoin Down 40%, Another 10% Drop Could Have ‘Catastrophic Consequences’"
Original Article Author: Zhao Ying, Wall Street News
Michael Burry, known for successfully predicting the 2008 U.S. real estate market crash in "The Big Short," has warned that Bitcoin has already plummeted 40%, and if it continues to drop, it could cause lasting damage to companies that have hoarded this asset over the past year. He believes Bitcoin has proven to be a purely speculative asset and has failed to become a hedge like precious metals.
In an article published on Substack on Monday, Burry pointed out that if Bitcoin were to drop another 10%, one of the most aggressive Bitcoin-holding companies, Strategy Inc., would suffer billions of dollars in losses and likely be unable to access the capital markets. He cautioned that a Bitcoin decline could trigger "catastrophic consequences," spreading to broader markets and leading to a "collateral death spiral" in tokenized metal futures.
As this warning was issued, Bitcoin continued its sharp decline on Tuesday, briefly dropping below $73,000, wiping out all gains since Trump's reelection in November 2024. Since hitting a historic high in early October, this cryptocurrency has fallen over 40%.

Despite Burry's warning, the cryptocurrency market remains relatively small and is unlikely to cause widespread contagion. With Bitcoin's market cap below $1.5 trillion, limited household ownership, and narrow corporate adoption, any wealth effect is likely to remain manageable.
Bitcoin Exposes Speculative Nature, Fails to Be a Safe Haven Asset
In the article, Burry pointed out that Bitcoin has not responded to typical driving factors such as a weak dollar or geopolitical risks, while gold and silver have hit historic highs due to concerns about dollar devaluation stemming from global tensions. "Bitcoin has no organic reason to slow its decline or stop it," Burry stated.
According to Bloomberg, analysts attribute the Bitcoin decline to multiple factors, including vanishing inflows, liquidity shrinkage, and a broad loss of macro allure. Many native cryptocurrency traders have also cooled on the token economy as predictions markets rise in prominence shifting to event betting.
Bitcoin fell to its lowest level since last year's tariff-induced turmoil over the weekend and continued to drop on Tuesday. This performance contrasts sharply with the arguments of its long-standing supporters, who believed Bitcoin's fixed supply made it comparable to gold.
Treasury Companies Under Tremendous Pressure
Burry warned that Bitcoin adoption by corporate treasuries and the launch of new cryptocurrency spot exchange-traded funds (ETFs) are insufficient to indefinitely support its price and prevent catastrophic consequences in a significant downturn. He noted that nearly 200 publicly traded companies hold Bitcoin.
While this has helped expand demand, "inventory asset is not permanent," he wrote. Inventory assets must be marked to market value and included in financial reports. If the Bitcoin price continues to drop, risk management officers will start advising their companies to sell.
Burry specifically mentioned that if Bitcoin were to drop another 10%, Strategy Inc., the most aggressive Bitcoin inventory company, would face losses in the billions of dollars and find capital markets essentially closed to it. He described these "vomit-inducing scenarios as now within reach."
ETFs Exacerbating Speculation and Increasing Market Correlation
Burry added that the advent of spot ETFs has only exacerbated Bitcoin's speculative nature while also increasing the token's correlation with the stock market. He wrote that Bitcoin's correlation with the S&P 500 index recently approached 0.50. In theory, when short positions start building, liquidation will actively kick in.
Burry pointed out that since late November, Bitcoin ETFs have been setting some of the largest single-day outflow records, with three occurrences in the last 10 days of January.
This trend indicates that institutional investors' confidence in Bitcoin is waning, and ETFs, originally seen as a tool to expand Bitcoin adoption, may instead accelerate selling in a market downturn.
Warning of "Collateral Death Spiral" Risk
As Bitcoin continues to break below certain key levels, Burry believes it is spilling over into the broader market. He noted that the cryptocurrency's decline is partly responsible for recent gold and silver meltdowns as corporate treasurers and speculators need to lower risk by selling profit positions in tokenized gold and silver futures.
These tokenized metal futures are not backed by actual physical metal and could overwhelm physical metal trading, leading to a "collateral death spiral," he said.
"It appears that at month-end, up to $1 billion in precious metals were liquidated due to cryptocurrency price declines," Burry wrote. If Bitcoin drops to $50,000, miners will go bankrupt, and "tokenized metal futures will collapse into a buyer-less black hole," he stated.
Nevertheless, some market observers point out that past crashes — from Terra to FTX — have failed to infect the traditional market. Bulls now point to regulatory clarity and cheap valuations as potential fuel for another rebound. But Burry's warning underscores the systemic risk that Bitcoin as a corporate treasury asset poses.
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Before using Musk's "Western WeChat" X Chat, you need to understand these three questions
The X Chat will be available for download on the App Store this Friday. The media has already covered the feature list, including self-destructing messages, screenshot prevention, 481-person group chats, Grok integration, and registration without a phone number, positioning it as the "Western WeChat." However, there are three questions that have hardly been addressed in any reports.
There is a sentence on X's official help page that is still hanging there: "If malicious insiders or X itself cause encrypted conversations to be exposed through legal processes, both the sender and receiver will be completely unaware."
No. The difference lies in where the keys are stored.
In Signal's end-to-end encryption, the keys never leave your device. X, the court, or any external party does not hold your keys. Signal's servers have nothing to decrypt your messages; even if they were subpoenaed, they could only provide registration timestamps and last connection times, as evidenced by past subpoena records.
X Chat uses the Juicebox protocol. This solution divides the key into three parts, each stored on three servers operated by X. When recovering the key with a PIN code, the system retrieves these three shards from X's servers and recombines them. No matter how complex the PIN code is, X is the actual custodian of the key, not the user.
This is the technical background of the "help page sentence": because the key is on X's servers, X has the ability to respond to legal processes without the user's knowledge. Signal does not have this capability, not because of policy, but because it simply does not have the key.
The following illustration compares the security mechanisms of Signal, WhatsApp, Telegram, and X Chat along six dimensions. X Chat is the only one of the four where the platform holds the key and the only one without Forward Secrecy.
The significance of Forward Secrecy is that even if a key is compromised at a certain point in time, historical messages cannot be decrypted because each message has a unique key. Signal's Double Ratchet protocol automatically updates the key after each message, a mechanism lacking in X Chat.
After analyzing the X Chat architecture in June 2025, Johns Hopkins University cryptology professor Matthew Green commented, "If we judge XChat as an end-to-end encryption scheme, this seems like a pretty game-over type of vulnerability." He later added, "I would not trust this any more than I trust current unencrypted DMs."
From a September 2025 TechCrunch report to being live in April 2026, this architecture saw no changes.
In a February 9, 2026 tweet, Musk pledged to undergo rigorous security tests of X Chat before its launch on X Chat and to open source all the code.
As of the April 17 launch date, no independent third-party audit has been completed, there is no official code repository on GitHub, the App Store's privacy label reveals X Chat collects five or more categories of data including location, contact info, and search history, directly contradicting the marketing claim of "No Ads, No Trackers."
Not continuous monitoring, but a clear access point.
For every message on X Chat, users can long-press and select "Ask Grok." When this button is clicked, the message is delivered to Grok in plaintext, transitioning from encrypted to unencrypted at this stage.
This design is not a vulnerability but a feature. However, X Chat's privacy policy does not state whether this plaintext data will be used for Grok's model training or if Grok will store this conversation content. By actively clicking "Ask Grok," users are voluntarily removing the encryption protection of that message.
There is also a structural issue: How quickly will this button shift from an "optional feature" to a "default habit"? The higher the quality of Grok's replies, the more frequently users will rely on it, leading to an increase in the proportion of messages flowing out of encryption protection. The actual encryption strength of X Chat, in the long run, depends not only on the design of the Juicebox protocol but also on the frequency of user clicks on "Ask Grok."
X Chat's initial release only supports iOS, with the Android version simply stating "coming soon" without a timeline.
In the global smartphone market, Android holds about 73%, while iOS holds about 27% (IDC/Statista, 2025). Of WhatsApp's 3.14 billion monthly active users, 73% are on Android (according to Demand Sage). In India, WhatsApp covers 854 million users, with over 95% Android penetration. In Brazil, there are 148 million users, with 81% on Android, and in Indonesia, there are 112 million users, with 87% on Android.
WhatsApp's dominance in the global communication market is built on Android. Signal, with a monthly active user base of around 85 million, also relies mainly on privacy-conscious users in Android-dominant countries.
X Chat circumvented this battlefield, with two possible interpretations. One is technical debt; X Chat is built with Rust, and achieving cross-platform support is not easy, so prioritizing iOS may be an engineering constraint. The other is a strategic choice; with iOS holding a market share of nearly 55% in the U.S., X's core user base being in the U.S., prioritizing iOS means focusing on their core user base rather than engaging in direct competition with Android-dominated emerging markets and WhatsApp.
These two interpretations are not mutually exclusive, leading to the same result: X Chat's debut saw it willingly forfeit 73% of the global smartphone user base.
This matter has been described by some: X Chat, along with X Money and Grok, forms a trifecta creating a closed-loop data system parallel to the existing infrastructure, similar in concept to the WeChat ecosystem. This assessment is not new, but with X Chat's launch, it's worth revisiting the schematic.
X Chat generates communication metadata, including information on who is talking to whom, for how long, and how frequently. This data flows into X's identity system. Part of the message content goes through the Ask Grok feature and enters Grok's processing chain. Financial transactions are handled by X Money: external public testing was completed in March, opening to the public in April, enabling fiat peer-to-peer transfers via Visa Direct. A senior Fireblocks executive confirmed plans for cryptocurrency payments to go live by the end of the year, holding money transmitter licenses in over 40 U.S. states currently.
Every WeChat feature operates within China's regulatory framework. Musk's system operates within Western regulatory frameworks, but he also serves as the head of the Department of Government Efficiency (DOGE). This is not a WeChat replica; it is a reenactment of the same logic under different political conditions.
The difference is that WeChat has never explicitly claimed to be "end-to-end encrypted" on its main interface, whereas X Chat does. "End-to-end encryption" in user perception means that no one, not even the platform, can see your messages. X Chat's architectural design does not meet this user expectation, but it uses this term.
X Chat consolidates the three data lines of "who this person is, who they are talking to, and where their money comes from and goes to" in one company's hands.
The help page sentence has never been just technical instructions.

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