Michael Burry, a hedge fund manager, commonly known as “The Big Short” has built a reputation for making predictions about the general financial markets, including cryptocurrencies. His notable prediction to date was the housing and subsequent market crash in 2008.
In general, Burry is a polarising figure in the world of investing. Indeed, with the cryptocurrency market gaining popularity in recent years, Burry has leveraged his Twitter account to make notable predictions and overviews regarding the sector. Finbold has therefore compiled the following predictions by Burry:
Prediction #1: Time for gold when crypto scandals merge into a contagion
In a deleted tweet on November 15, Burry stated that gold is likely to rise to the occasion, especially with the cryptocurrency sector being marred by different scandals. Notably, the 2022 market correction is partly due to scandals and bankruptcies that resulted in users losing significant amounts of money.
Burry noted that the scandals are likely to merge into a ‘contagion. His suggestion implies that the scandals will make cryptocurrencies unattractive.
Some high-profile scandals to hit the sector include the FTX crypto exchange collapse, the Terra (LUNA) ecosystem crash, and the Celsius Network bankruptcy filing. As the crypto market corrected, the precious metal, on the other hand, has performed well despite the prevailing macroeconomic environment.
At the moment, as per the prediction, investor interest in cryptocurrencies remains suppressed with a majority staying on the sidelines. On the other hand, gold has recorded impressive performance as the crypto space battles the ongoing winter.
Prediction #2: Bitcoin and stocks crash second phase in 2022 Q2
Across 2022, both the equities market and cryptocurrencies have suffered a massive correction amid prevailing macroeconomic factors led by inflation and interest rate hikes. Based on the market’s performance from the first half, Burry hinted that the second half of the market crash could play out in the last six months of the year.
In fact, both Bitcoin (BTC) and equities are yet to pick up despite the inflation showing signs of slowing down.
“Adjusted for inflation, 2022 first-half S&P 500 down 25-26%, and the Nasdaq down 34-35%, Bitcoin down 64-65%. That was multiple compression. Next up, earnings compression. So, maybe halfway there,” said Burry.
It is worth mentioning that after showing signs of rallying towards $18,000, Bitcoin has failed to maintain the gains. The short-term rally emerged after the U.S. inflation slowed with the Federal Reserve cooling down on interest rate hikes.
Based on this prediction, despite Bitcoin making slight gains, the entire crypto space is still in a bear market with most assets looking for a bottom.
Prediction #3: Expect the mother of all crashes
In June 2021, the ‘Big Short’ predicted the mother of all crashes for stocks and cryptocurrencies. According to Burry, the crash from the crypto will likely spread over to the ‘main street,’ noting that history has not changed. He made the prediction at the height of the 2021 crypto bull market.
“All hype/speculation is doing is drawing in retail before the mother of all crashes. When crypto falls from trillions, or meme stocks fall from tens of billions, #MainStreet losses will affect countries’ size. History ain’t changed,” he said.
Additionally, Burry stated that the issue with crypto is leverage. He stressed that investors need to understand leverage before engaging in crypto.
As things stands, the prediction was realized in 2022 after both the stocks and cryptocurrencies showed high correlation characterized with significant capital outflow. For instance, the crypto market lost almost $2 trillion in capitalization.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.