Michael Burry, well known for predicting the 2008 financial crisis, has issued a strong warning about the U.S. Federal Reserve’s plan to purchase $40 billion in Treasury bills. He argues that the move signals deep liquidity issues within the banking sector and may accelerate a broader financial downturn. His comments have sparked new concerns about whether the tightening liquidity environment could heighten volatility in Bitcoin and the crypto market.
Burry Warns of Structural Weakness in U.S. Banking
Fed Chair Jerome Powell recently confirmed that the central bank will buy $40 billion in T-bills over the next month. Although the Fed insists this is not a return to quantitative easing, Burry argues the opposite. He says the plan highlights an ongoing liquidity shortage in the banking system and reveals that banks remain dependent on elevated reserve levels to operate normally.
According to Burry, bank reserves have climbed from $2.2 trillion before the 2023 banking turmoil to more than $3 trillion today. He contends that if banks cannot function without continuous support from the Fed, this reflects financial fragility—not stability. He also criticized the labeling of these purchases as “Reserve Management Purchases,” calling it a disguised effort to prop up institutions still struggling after previous crises.
Burry further warned that each financial disruption leads to a permanent expansion of the Fed’s balance sheet, a trend he believes distorts financial markets. He noted this continuous intervention is partly why equity markets continue to perform well despite underlying risks.
Burry Predicts QE Will Return
Burry reiterated that the Fed is already injecting liquidity through repo operations shortly after the end of quantitative tightening—a move that previously helped fuel rebounds in crypto markets. He cautioned investors about Wall Street’s recommendations to buy bank stocks, instead preferring to store cash in Treasury Money Market Funds when amounts exceed FDIC insurance limits.
He also pointed to the Treasury’s shift toward selling more short-term bills, while the Fed focuses on buying them, helping avoid pressure on 10-year yields. Following the FOMC meeting, the 2-month Treasury yield jumped while the 10-year yield declined, reflecting market uncertainty. Analysts warn that continued repo volatility may force the Fed into even more aggressive measures, reinforcing Burry’s case for systemic weakness.
Bitcoin Drops Below $90K as Pressure Builds
Bitcoin has fallen over 2% in the last day, trading near $90,252 ahead of a major options expiry. The price range has fluctuated between $89,459 and $94,477, with analysts noting BTC’s failure to reclaim the $93,000–$94,000 zone. Crypto analyst Ted Pillows expects the price could revisit the $85,000 region if selling continues.
On the daily chart, the $88,000–$89,000 support zone remains the next key level to watch, and many anticipate a retest. Meanwhile, miner selling has increased, with Marathon Digital offloading 275 BTC valued at more than $25 million, according to Lookonchain.
