Michael Burry, a hedge fund manager, commonly known as “The Big Short” has built a reputation for making predictions about general financial markets, including cryptocurrencies. His notable prediction to date has been the housing market and subsequent market crash in 2008.
Overall, Burry is a polarizing figure in the investment world. In fact, with the cryptocurrency market gaining popularity in recent years, Burry has been taking advantage of his Twitter account to make some impressive industry forecasts and overviews. Finbold then compiled the following predictions from Burry:
Forecast no. 1: Time for gold as cryptocurrency scandals merge into a contagion
In a canceled tweets on Nov. 15, Burry said gold is likely to rise to the occasion, especially with the cryptocurrency sector having been marred by several scandals. In particular, the 2022 market correction is partly due to scandals and bankruptcies that led to users losing large sums of money.
Burry noted that the scandals are likely to blur into “contagion”. Her suggestion implies that the scandals will make cryptocurrencies unattractive.
Some high-profile scandals to hit the industry include the collapse of cryptocurrency exchange FTX, the collapse of the Terra (LUNA) ecosystem, and the bankruptcy filing of Celsius Network. With the correction in the cryptocurrency market, the precious metal, on the other hand, has performed well despite the prevailing macroeconomic backdrop.
At the moment, as expected, investor interest in cryptocurrencies remains suppressed with the majority remaining on the sidelines. On the other hand, gold has posted an impressive performance as the crypto space battles the ongoing winter.
Forecast no. 2: Bitcoin and stocks crash in the second phase in the second quarter of 2022
Over the course of 2022, both the stock market and cryptocurrencies have undergone a massive correction due to the prevailing macroeconomic factors driven by inflation and interest rate hikes. Based on the market’s performance in the first half, Burry hinted that the second half of the market crash could occur in the last six months of the year.
Indeed, both Bitcoin (BTC) and stocks have yet to recover despite inflation showing signs of slowing down.
“Adjusted for inflation, the S&P 500 H1 2022 is down 25-26% and the Nasdaq is down 34-35%, Bitcoin is down 64-65%. That was multiple compression. Next, the profit squeeze. So maybe halfway there,” Burry said.
It is worth mentioning that after showing signs of rallying towards $18,000, Bitcoin has failed to hold the gains. The short-term rally emerged after US inflation slowed as the Federal Reserve cooled on interest rate hikes.
Based on this forecast, despite Bitcoin posting slight gains, the entire cryptocurrency sector is still in a bear market with most assets looking for a bottom.
Forecast no. Tip #3: Expect the mother of all accidents
In June 2021, the “Big Short” predicted the mother of all crashes for stocks and cryptocurrencies. According to Burry, the cryptocurrency crash will likely extend to “the high street,” noting that the story hasn’t changed. He made the prediction at the height of the 2021 cryptocurrency bull market.
“All the hype/speculation is making retail lure before the mother of all crashes. When cryptocurrencies drop by trillions or meme stocks drop by tens of billions, #MainStreet losses will affect the size of countries. The story hasn’t changed,” she said.
Furthermore, Burry said that the problem with cryptocurrencies is leverage. She stressed that investors need to understand leverage before engaging in cryptocurrencies.
As it stands, the prediction came true in 2022 after both stocks and cryptocurrencies showed high correlation characterized by significant capital outflow. For example, the cryptocurrency market has lost nearly $2 trillion in market capitalization.
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