Experts explain what ‘Big Short’ Michael Burry’s stock exit means for crypto

by · August 16, 2022

Michael Burry, the investor who famously shorted the 2008 housing bubble, has dumped almost all the stocks in his portfolio during the second quarter, suggesting that there could be carnage ahead for the stock and crypto markets.

According to a 13F disclosure filed with the Securities and Exchange Commission (SEC) on August 15, Burry’s hedge fund Scion Asset Management dumped about $292 million worth of shares across companies from Apple and Meta to pharmaceutical giant Bristol-Myers Squibb, leaving only a minor position in a private prison company.

As Bitcoin (BTC) and crypto have a strong correlation to the stock market, especially in relation to macroeconomic events such as interest rate hikes by the Federal Reserve and the Russia/Ukraine conflict, Burry’s bearish view on stocks could also be a warning sign for the crypto. sector.

But when asked by Cointelegraph whether Burry’s actions could spell potential gloom for the crypto markets, Quantum Economics founder and CEO Mati Greenspan said he is relatively unfazed by Burry’s move, despite his track record of predicting bearish scenarios.

Greenspan stated that it is almost impossible to predict the timing and magnitude of crashes, and suggested that there is generally always something bearish on the horizon that could potentially cause stock and cryptocurrency prices to crash.

“Predicting a stock crash is a lot like predicting an earthquake. You know it will happen sometimes, but you can never tell exactly when or how severe it will be.”

He also stressed that investors shouldn’t jump on every piece of FUD that circulates online, noting that “investing is a long-term game and doesn’t normally work for people who jump at shadows.”

Earlier this month, Burry warned investors that despite the recent rally in crypto and stocks, “winter is coming.” He pointed to US consumer credit rising by $40 billion per month as opposed to the historical average of $28 billion month over month as reasons for this.

Seeking Alpha analyst Garret Duyck offered a different view to Greenspan, however, outlining in an Aug. 16 article that Burry’s concerns over macro factors such as consumer credit, housing and business conditions could be something investors should take note of.

“I notice when Michael Burry is a bear, and right now he’s a big bear. By liquidating the positions in his portfolio, save one, he is putting his money where his mouth has been: out of the market.”

“The macro data seems to support his hypothesis. I see weakness across the board. Consumers are struggling while housing and business conditions show job weakness. Earnings estimates are too generous, and negative earnings will materially impact valuations of stocks that are already stretched.” he added.

Burry’s predictions

While Burry’s predictions have had varying accuracy since he rose to fame by short-circuiting the 2008 housing bubble, some of his latest crypto predictions have generally come true.

For example, in March 2021, Burry described Bitcoin (BTC) as a “speculative bubble that poses more risk than opportunity” when he predicted a crash would soon unfold. This coincided with the price of BTC going from $59,000 in March to around $34,000 by the end of May.

Related: The Big Shorts Michael Burry takes aim at the Cathie Woods Ark Innovation ETF

In June, he followed it up with labeling the price action in stock and crypto markets as “the greatest speculative bubble of all time.” And while BTC went on a rise to a new ATH in November of around $69,044, no one needs reminding of how much the market has crashed since then.