Michael J. Burry, the historical figure portrayed in “The Big Short“, is known for predicting crises. During the second quarter of 2022, Burry liquidated almost all of his investment portfolio after the 2008 housing crash.
Since no one seems to know whether traditional markets will bounce before entering a recessive environment, now may be a good time to consider investing in cryptocurrencies. A few examples are provided below of how experienced investors often miss incredible rallies.
Burry predicted a “global financial meltdown” and World War 3 in May 2017. Instead, the S&P 500 rose 20% over the next nine months. After a few years, the index peaked in December 2021, more than 100% above Burry’s suggested short entry price.
Indicators point to a major recession, but the precise timing is unknown.
Traders should not ignore the fact that the US dollar index has surged against other major global currencies to reach its highest level in 20 years. This demonstrates that investors are desperately looking for a safe haven in cash positions, exiting stock markets, foreign currencies, and corporate debt.
The cost of borrowing USD impacts multiple economies
The main takeaway from the lack of an effective circular trade solely using cryptocurrencies is that everyone’s life is dependent on the strength and borrowing cost of the US dollar. When investors hoard cash and interest rates skyrocket, every market is impacted, unless one lives in a cave, isolated in a self-sufficient land, or on some communist island.
The impact of a future housing market collapse or another 20% drop in stock markets on Bitcoin and Ether is impossible to predict. Holders are under pressure to reduce their exposure and secure a cash position in anticipation of a longer-than-expected crypto-winter. On the other hand, there may be a surge in investors seeking non-confiscatable assets or inflation protection.