- Schiff warns Bitcoin collateral risks could trigger massive liquidation losses.
- Leverage risks and forced selling could worsen crypto market collapse.
- Ethereum’s decline adds to concerns, with Bitcoin following a similar path.
Peter Schiff, a prominent economist and gold advocate, has issued a stark warning for Bitcoin holders who have pledged their tokens as collateral for loans. According to Schiff, these investors could face massive losses if the market crashes, as their positions would be liquidated at significantly lower prices.
Schiff argued that many Bitcoin holders are borrowing against their assets to fund other investments or lifestyles without selling their tokens. However, a market downturn could force them to sell at a loss, amplifying the overall market decline.
Leverage Risks Could Exacerbate Market Collapse, Leading to Widespread Losses
Schiff highlighted the risks associated with leverage in the crypto market, emphasizing that a significant price drop would trigger forced liquidations for those who have borrowed against their Bitcoin.
This could create a snowball effect, where the selling pressure further depresses the market, leading to even more losses. Additionally, many investors may not realize enough cash from the forced sales to meet their tax obligations, adding another layer of financial strain.
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While some in the crypto community believe that Bitcoin could bounce back after a sharp market dip—citing institutional buying at the bottom—Schiff remained firm in his belief that those who borrowed against their Bitcoin would still suffer.
He acknowledged the possibility of long-term recovery for Bitcoin but stressed that liquidation would occur during the market’s low points, leading to significant financial damage.
Government Intervention and Ethereum’s Decline: Additional Concerns for the Crypto Market
Schiff also raised the prospect of government intervention, wondering if Bitcoin’s supporters, including those linked to former President Donald Trump, might push for the creation of a Strategic Bitcoin Reserve to stabilize the market. However, he dismissed this idea, arguing that any such intervention would expose the inherent flaws in Bitcoin’s market structure and raise more questions about its viability.
In addition to his warnings about Bitcoin, Schiff pointed out that Ethereum is experiencing an even steeper decline. Ethereum’s value has dropped nearly 40% from its peak in August, erasing most of its gains for 2025. Schiff predicted that Bitcoin could soon follow a similar downward trajectory, potentially erasing its year-to-date gains.
Schiff’s comments highlight the risks of using leverage in the volatile crypto market. If Bitcoin and Ethereum continue to experience significant price drops, investors who have pledged their tokens as collateral could face forced liquidations, leading to massive losses across the industry.
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