Tokenized silver futures suffered one of the largest liquidation events across crypto markets this week, briefly eclipsing bitcoin and ether as the biggest source of forced selling.
The crypto-native version of silver proved more volatile than bitcoin during the selloff, inflicting heavy losses on leveraged traders. Hedge fund manager Michael Burry, best known for “The Big Short,” described the move as a self-reinforcing cycle in which falling prices triggered liquidations that drove prices even lower.
In a note this week, Burry characterized the episode as a “collateral death spiral,” arguing that high leverage across crypto venues amplified the damage. As crypto collateral values fell, traders were forced to liquidate tokenized metals positions to meet margin requirements, accelerating the downturn.
“Sky-high leverage on these crypto exchanges due to rising metals prices meant that as the crypto collateral fell, the tokenized metals had to be sold,” Burry said. “This is a collateral death spiral.”
Burry noted that liquidations tied to silver positions exceeded bitcoin liquidations on at least one crypto venue during the unwind. “It was reported that tokenized silver futures liquidations actually exceeded Bitcoin liquidations on one crypto market called, ironically, Hyperliquid,” he added.
The reversal was driven less by bitcoin-specific weakness and more by positioning in metals markets, where a sharp pullback collided with crowded leverage and thin liquidity. At the height of the move, tokenized silver futures ranked among the largest liquidation events across crypto markets, overtaking the usual leaders bitcoin and ether.
Tokenized metals contracts allow traders to take directional bets on gold, silver, and copper using crypto-native platforms rather than traditional futures exchanges. These products trade around the clock and typically require less upfront capital, making them attractive during volatile periods. However, that same structure can accelerate forced selling when prices move against heavily leveraged positions.
As metals prices rolled over, leveraged longs were forced to unwind. Liquidations surged as traders failed to meet margin requirements or saw positions automatically closed by trading platforms. On Hyperliquid—one of the most active venues for tokenized metals—silver-linked liquidations briefly surpassed those tied to bitcoin, a rare instance where a macro-linked contract became the primary driver of market stress.
The episode also coincided with tightening conditions in traditional markets. CME Group raised margin requirements for gold and silver futures, increasing collateral demands and pressuring leveraged traders to either post additional capital or reduce exposure. While those changes apply directly to CME contracts, traders say shifts in positioning and risk appetite often spill into tokenized markets that track the same underlying assets.
The broader takeaway is that crypto venues are no longer limited to crypto-native trades. They are increasingly being used as alternative rails for macro exposure—and during periods of stress, that shift can upend traditional liquidation dynamics in unexpected ways
