2022 was not the best year for the cryptocurrency market in retrospect. The main reason for this was the macro situation in traditional markets. So what’s next? Hedge fund manager Michael Burry, who attracted attention with his investments in the crisis in 2008, shared his expectations about the market. Here are the details…
Michael Burry shared his comments on the cryptocurrency market
With rising inflation, financial regulators in the US are putting into action a tight monetary policy. He is left with no choice but to suffocate any risky investment vehicle and drag the crypto markets down. Michael Burry believes that 2023 will be no different. According to Burry, inflation has peaked, but this isn’t the last peak of this entire cycle. In the new year, we will see the CPI become even lower or possibly negative in the second half of 2023.
Inflation peaked. But it is not the last peak of this cycle. We are likely to see CPI lower, possibly negative in 2H 2023, and the US in recession by any definition. Fed will cut and government will stimulate. And we will have another inflation spike. It's not hard.
— Cassandra B.C. (@michaeljburry) January 2, 2023
Such a drastic fall would cause the recession that everyone expected last year. Unfortunately for cryptocurrency and other risky markets, Burry expects another inflation boost. If the analyst is right, the market will have no choice but to face further pressure due to a significant rate hike. cryptocoin.comAs we have also reported, when we look at the forecasts of other conservative financial analysts, it is clear that Burry is not the only person who believes that the macroeconomic situation in the financial field will deteriorate.
Unfortunately, the correlation between the S&P 500 and Bitcoin reached an absolute high in 2022. This made Bitcoin de facto dependent on the performance of the index. However, such a high correlation between the two instruments should not surprise investors. After the run of 2021, a significant amount of institutional investors have had exposure to the cryptocurrency market, and Bitcoin in particular. As macroeconomic conditions for risky assets worsened, institutions began selling their risky assets, including Bitcoin. This put a lot of pressure on the entire market.
His warning about the stock markets is still valid.
Hedge fund manager Michael Burry, who inspired the movie “The Big Short,” sounded the alarm about “the biggest speculative bubble of all time” in the summer of 2021. He warned that the market was heading towards the “mother of all crashes”. The S&P 500 and Nasdaq indices fell 19 percent and 33 percent, respectively, in 2022. So the brutal prediction of the Scion Asset Management executive may be coming true. Burry, who came to the agenda with his explanations for stock markets other than cryptocurrencies, also explained why he expects more decreases. He warned against buying into aid rallies.
The S&P 500 index rebounded strongly from the pandemic collapse in spring 2020, rising from 2,192 points to 3,800 points. However, according to Burry’s tweet on May 3, 2022, its value could drop in half to less than 1,900 points in the next few years. Burry noted that when the S&P 500 fell in the past, it traded lower a few years later.