No no, he used his magic fire body to melt his way through the earth, kinda like this,, except he also made the earth re-solidify above him. He kept going until he hit a cave then just kinda chilled in there for several thousand years until the dwarves very rudely broke in and woke him up.

He just wanted the longest, most secluded nap ever.

Drawing is clearly not to scale.

The dwarves woke the balrog by digging two deep, not just one.