Mati Greenspan

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

“Predicting a stock crash is a lot like predicting an earthquake. You know one will happen every so often but you can never tell exactly when or how severe it will be,” said Mati Greenspan.

Michael Burry, the investor who famously shorted the 2008 housing bubble, has dumped nearly all the stocks in his portfolio during Q2, suggesting there may be carnage ahead for stock and crypto markets.

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

Michael Burry selling everything and buying a large position in a private prison company after seeing the IRS is hiring 87,000 new agents pic.twitter.com/lT5ny4SdlC

— Wall Street Memes (@wallstmemes) August 15, 2022

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

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

Greenspan stated that it’s near impossible to predict the time and scale of crashes and suggested that there is generally always something bearish on the horizon that could potentially send stock and crypto prices crashing:

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

He also stressed that investors shouldn’t jump at every piece of FUD that circulates online, noting that “investing is a long-term play and doesn’t normally work out 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 U.S. consumer credit rates rising by $40 billion per month in contrast to its historical average of $28 billion month over month as reasons for such.

Seeking Alpha analyst Garret Duyck, however, offered a different take to Greenspan, outlining in a Tuesday article that Burry’s concerns over macro factors such as consumer credit, housing and business conditions may be something investors should take note:

“I take notice when Michael Burry is a bear and right now he is a huge 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’m seeing weakness all over the place. The consumer is struggling while housing and business conditions are projecting job weakness. Earnings estimates are too generous and negative earnings will materially impact equity valuations which are already stretched.” he added.

Burry’s predictions

While Burry’s predictions have had varying accuracy since he rose to fame by shorting the 2008 housing bubble, some of his most recent takes on crypto have generally come into fruition.

For example, in March 2021, Burry described Bitcoin as a “speculative bubble that poses more risk than opportunity,” as 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.

In June, he followed that up by labeling the price action in stock and crypto markets as the “Greatest Speculative Bubble of All Time in All Things.” And while BTC went on a surge to a new ATH in November of around $69,044, no one needs reminding of how much the market has crashed since then.

‘Bullish rate hike’ — Why crypto spiked today in the face of bad news

The Fed’s attempts to reel inflation in by increasing interest rates are usually associated with a pullback of investment activity across markets.

The cryptocurrency markets have been pumping since the announcement of a 75 basis point interest rate hike in the United States, with experts explaining that the markets may have been initially bracing for much worse.

On July 27, the price of Bitcoin (BTC) surged around 8% to the mid $22,500 mark following the Federal Open Markets Committee (FOMC) decision to raise interest rates yet again. Many other top crypto assets surged in price as well, with Ether (ETH), Polkadot (DOT) and Polygon (MATIC) all seeing notable double-digit gains over the past 24 hours.

Quantum Economics founder and CEO Mati Greenspan on Wednesday jokingly questioned whether this was a “bullish rate hike” on Twitter.

Speaking with Cointelegraph, Greenspan noted that investors were clearly expecting worse and suggested this latest bounce is nothing out of the ordinary:

“Markets love going up on Fed days, even when their decision is to be tough. Powell is particularly skilled at delivering bad news. Clearly investors were expecting worse.”

Markets were expecting a larger hike. https://t.co/HkR8Upfi52

— Mati Greenspan (@MatiGreenspan) July 27, 2022

The Fed’s attempts to reel inflation in by increasing interest rates are usually associated with a pullback of investment activity across markets.

However, there are mixed opinions among the community about whether the latest pump will have enough momentum to sustain upward or if there is a significant retracement on the cards before the market starts to fully recover

Don’t you see that price is just ranging between 19k and 23k during a downtrend and with no signs of accumulation?

If you want to buy here, go ahead. Then don’t regret it and cry if the market makes new lows, which is likely.

I’m not buying.

— il Capo Of Crypto (@CryptoCapo_) July 27, 2022

Pav Hundal, an analyst at Australian crypto exchange Swyftx, told Cointelegraph that the company was “surprised at the exuberance of the reaction to yesterday’s rate hike,” as the underlying macro landscape still seems up in the air:

The Fed is saying one thing and the markets seem to be hearing something else every time we see rate rises. In June, it was the Fed suggesting large rate hikes would be ‘uncommon,’ this time around it’s Jay Powell hinting that the pace of increase might ‘slow.’”

“The best gauge of what’s to come is the underlying economic data and for now at least, it does look like some inflationary pressures are easing, with gas prices falling alongside futures prices for staples like corn and wheat, as well as some shipping costs,” he added.

Hundal went on to note that Swyftx saw a 100% increase in early trading surrounding the news, indicating that “there’s clearly a lot of people who see value in the current market prices.”

The analyst emphasized that a broader bullish or bearish trend will not likely become apparent until the U.S. releases important data relating to the performance of its gross domestic product (GDP) in the coming days, which could signal whether the country is officially in recession or not:

“The good news is we’re not going to have to wait too long to see what happens to the crypto market when any initial volatility washes out. The U.S. is about to release its GDP data and that’s going to be a big stress test. Any negative sentiment here could wipe out recent gains.”

“But if the macro landscape starts to show signs of resilience, we could see the crypto market cap stabilize at the $1 trillion point and rally from there,” he added.