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

Published at: Aug. 17, 2022

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 Securities and Exchange Commission (SEC) on Aug. 15, 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.

However, 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 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 an Aug. 16 article that Burry’s concerns over macro factors such as consumer credit, housing and business conditions may be something investors should take note of.

“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 (BTC) 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.