Crypto Will Cause The Next Trillon Dollar Crash

Last week, I wrote about what I believe is one of the most significant developments in Bitcoin’s history — and possibly one of the most underappreciated risks in modern finance. The Trump administration has now formally approved a framework that allows Bitcoin to be offered as an investment option in select 401(k) retirement plans, while at the same time stablecoins are making up an increasingly larger bid for U.S. Treasuries, both of which are weaving crypto the furthest it’s ever been to the U.S. economy.

That’s not just “more adoption.” It’s the infiltration of Bitcoin into the cornerstone of American personal finance (and the current stock market bid) — retirement accounts. These aren’t speculative trading accounts or offshore exchanges; these are the investment vehicles that millions of Americans rely on for financial security decades into the future — and maybe more importantly, for emergency liquidity in the event of a recession.

In my piece, Is Bitcoin Too Deep in the Fabric of the U.S. Financial System?, I laid out what I think is the core reality: Bitcoin has crossed the moat. It’s no longer trying to get into the castle — it’s inside the walls. And once you start weaving something this volatile into pensions, ETFs, corporate treasuries, and now retirement plans, unwinding it without collateral damage becomes nearly impossible.

I presented both sides.

• The bull case, from my friend James Lavish, is that Bitcoin is a rational hedge against the inevitable debasement of fiat currencies. In this view, its fixed supply, decentralized governance, and incorruptible rules make it the perfect monetary anchor in a system addicted to credit expansion and political interference.

• The bear case is that by stitching Bitcoin so tightly into our financial infrastructure, we’re effectively creating an Achilles’ heel. If the protocol fails — whether through technical failure, regulatory choke-off, or security breach — it could spark a systemic liquidity crisis. And because Bitcoin is now widely held by institutions, pensions, and retail investors alike, the contagion wouldn’t stay in the crypto corner; it would ripple out into the broader economy.

I didn’t tell readers which camp to join, because the truth is, I’m still weighing both sides. But I made one thing clear: there’s no turning back from this level of integration.

Here’s where my personal history comes in. I’ve been saying for years — since before I even owned a single satoshi — that I thought crypto could be the cause of the next major market crash. I’ve called it the “tip of the spear” for risk assets.

Owning Bitcoin hasn’t changed that view. In fact, it’s sharpened it. I’ve repeated many times that, as far as risk assets go, crypto is the biggest.

In my recent conversation with Dan Ferris, I reminded him that certain assets — whether cryptocurrencies or cash-burning, insolvent equities — have no “floor” in a true liquidation event. If there’s no deep value bid, the bottom isn’t $50, or $5 — it’s zero. And in a panic, that’s where things with no intrinsic value, can go.

That’s why today’s numbers are worth paying attention to. The total crypto market cap now stands above $3 trillion. Even if Bitcoin survives a market shock, a 50% drawdown in crypto would erase $1.5 trillion dollars in value instantly.

$1.5 trillion is a serious number. That’s about one-third of the total destruction seen in the entire dot-com bust, when nearly $4.6 trillion in Nasdaq value evaporated between 2000 and 2002, but compressed into a matter of days or weeks (or minutes or seconds) rather than years.

It’s also in the same league as the immediate equity market losses following Lehman Brothers’ collapse in 2008, when U.S. stocks shed roughly $1.5 trillion in a single week, setting off a global financial panic that ultimately erased $8 trillion in U.S. market cap.

Unlike past episodes, though, today’s crypto losses would directly hit 401(k)s, ETFs, corporate balance sheets, and even Treasury demand via stablecoins — giving them systemic reach that combines the market integration of 2008 with the speculative froth of 2000. In other words, the numbers are large enough, and the wiring is deep enough, for a crypto crash to be more than just a “tech sector” wipeout — it could plausibly be the spark for the next broad-market crisis.

For meme tokens, zombie projects, and coins like Fartcoin, the endgame isn’t “maybe” zero — it’s eventually zero. The only question is timing. And remember, this doesn’t account for the market cap of public companies now holding crypto on their balance sheets, adding second-order exposure risk to equities and indexes.

Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence, echoed similar concerns in his recent interview with Palisades Gold Radio.

“The most significant systemic risk I think in the system I’ve ever seen [is] one simple little market — and that’s Bitcoin… I think the risk is it goes down and takes the system with it.”

McGlone’s broader point was that the U.S. stock market is “so elevated” that the Fed’s room to ease is limited until we see a meaningful correction. That means the setup for risk assets is skewed toward reversion — and Bitcoin, he argues, could lead the way down. He went further:

“People are so addicted to [the idea that] the stock market just goes up… there’s only a few times in history you hear statements like that, and every time I’ve heard things like that… it usually means you should be worried about what happens in normal capitalist cycles.”

In other words, when you hear “it’s different this time,” history is whispering back: No, it isn’t. McGlone also made an important observation about market psychology:

“When you have an asset like Bitcoin that’s endorsed by a president, virtually everybody in the administration owns it and loves it, and everybody is starting to buy it — you have to say thank you very much. If you’ve made some money in it, probably better not to join the party here.”

That’s classic late-cycle behavior — mass enthusiasm, political endorsement, and the belief that volatility has been tamed. Bitcoin’s annual volatility relative to gold is now the lowest in history. That’s a sign of “adulting,” as McGlone put it — but also a warning that the outsized returns are gone, leaving more downside risk than upside asymmetry.

This is why my conclusion doesn’t depend on whether I’m bullish or bearish on bitcoin at the moment. I own it and will continue to buy on a recurring basis no matter what the price. But it doesn’t change the fact that the objective truth is this: the more deeply crypto is integrated into the plumbing of the global financial system, the more likely it is to serve as the fault line in the next crisis.

We’ve seen this pattern before — in housing before 2008, in dot-com equities before 2000, in leveraged buyouts before 1987. The common thread is that the trigger isn’t just a speculative bubble — it’s a bubble that’s been wired into the system so tightly that when it pops, the shock spreads everywhere.

Right now, that’s exactly what’s happening with crypto. And now, with 401(k)s officially in the mix, the exposure is deeper than ever.

Whether Bitcoin eventually fulfills its promise as digital gold or not, the near-term reality is that it’s a risk asset with no guaranteed floor. And when risk assets unwind at scale, they don’t just hurt the gamblers — they hit pensions, portfolios, and the broader economy.

I’ve been saying for years that crypto could be the trigger for the next crash. Nothing I’ve seen lately changes that view. If anything, the case is stronger as crypto gets bigger. In fact, when you look back at the great market dislocations of the last half-century, the trigger asset always shares three characteristics:

1. A massive run-up fueled by speculative fervor

2. Widespread integration into the financial system — directly or indirectly

3. The belief that “it’s different this time”

Once those conditions are met, the only missing ingredient is a catalyst — and history has no shortage of them.

1987: The LBO Frenzy

The ‘87 crash is often remembered for portfolio insurance gone wrong, but the backdrop was a leveraged buyout boom that had inflated valuations and drawn in speculative capital. Once selling began, the structures meant to “protect” investors actually amplified the fall.

Parallel to crypto today: The LBO craze had bled into mutual funds, pension strategies, and corporate finance just as crypto is now bleeding into ETFs, public company treasuries, and retirement accounts.

2000: The Dot-Com Bubble

By the late 1990s, tech stocks weren’t just a sector — they were the market story. The Nasdaq tripled in under two years. Pets.com wasn’t just a stock, it was an emblem of the era’s blind optimism. The prevailing narrative was that internet-based companies could only go up because the technology was world-changing.

Parallel to crypto today: Blockchain and digital assets are touted as transformative — and they may well be — but that doesn’t mean every project deserves its valuation. Just as in 2000, the good ideas and the bad are all rising together. And in 2000, when the tide went out, the bad ideas went to zero, and even the Amazons of the world lost 90% before recovering.

2008: Housing and the Global Financial Crisis

This one’s the clearest parallel in terms of systemic wiring. Housing wasn’t just an asset class in 2008 — it was tied into mortgage-backed securities, bank balance sheets, money market funds, and credit default swaps. When the value of the underlying asset dropped, the shockwave traveled through the entire global financial system.

Parallel to crypto today: With Bitcoin now sitting in retirement portfolios, ETFs, and corporate balance sheets, a major crypto drawdown would instantly show up in equity prices, index funds, and even in pension fund returns. The wiring is there.

What Happens When the Crash Starts in Crypto?

If crypto is the starting point, here’s how I think it could play out:

1. Initial Shock – A sharp price drop in Bitcoin (whether from macro tightening, a major hack, or a sudden shift in sentiment) triggers panic selling across the crypto market.

2. Contagion to Equities – Public companies with large Bitcoin positions see their stock prices hit. ETFs tracking Bitcoin or blockchain sectors bleed. Leveraged crypto companies start defaulting.

3. Liquidity Drain – Investors sell other risk assets to meet margin calls or offset losses, pulling down stocks more broadly.

4. Pension and Retirement Account Impact – Funds with crypto exposure, even a small percentage, see performance drag, hitting retirement account values.

5. Confidence Crisis – If the drawdown is steep enough, especially in an environment of high valuations and macro stress, investor psychology shifts from “buy the dip” to “get me out.”

The Post-Crash Landscape

History also tells us what comes next. After the dot-com crash, the internet didn’t go away — it matured. After 2008, housing didn’t disappear — lending standards changed.

If crypto is the trigger this time, we can expect:

• Survivors and consolidation – The large, most-established projects (like Bitcoin and Ethereum) likely survive, but thousands of smaller coins go to zero.

• Regulatory overhaul – Just as Sarbanes-Oxley followed Enron, and Dodd-Frank followed the GFC, a major crypto crash would invite sweeping regulation, likely restricting speculative activity and mandating custody and reporting standards.

• Lower but steadier growth – Volatility drops, but so do the life-changing gains. Bitcoin could settle into its role as a slower-moving “digital gold” if it survives.

• Public skepticism – Retail enthusiasm takes years to recover. Early adopters will tell “I told you so” stories, and mainstream investors will tread cautiously.

Is This Time Different?

Mike McGlone’s warning keeps echoing in my head:

“We’ve lifted things so high that every time we have a problem, the Fed’s supposed to save us — and they will. But I think what we’re going to start now is a cat-and-mouse game between normalization of very expensive equities… and the most significant systemic risk I’ve ever seen — Bitcoin.”

We’ve seen the movie before — the faces and the asset names change, but the arc is the same. The excess builds, the wiring spreads, the confidence grows — and then the catalyst arrives.

QTR’s Disclaimer: Please read my full legal disclaimer on my About page here. This post represents my opinions only. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author.

This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. I may or may not own names I write about and are watching. Sometimes I’m bullish without owning things, sometimes I’m bearish and do own things. Just assume my positions could be exactly the opposite of what you think they are just in case. If I’m long I could quickly be short and vice versa. I won’t update my positions. All positions can change immediately as soon as I publish this, with or without notice and at any point I can be long, short or neutral on any position. You are on your own. Do not make decisions based on my blog. I exist on the fringe. If you see numbers and calculations of any sort, assume they are wrong and double check them. I failed Algebra in 8th grade and topped off my high school math accolades by getting a D- in remedial Calculus my senior year, before becoming an English major in college so I could bullshit my way through things easier.

The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I’m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.