Legendary trader Michael J. Burry said that since no one will know if traditional markets will recover before entering a further downturn, this may be a good time to consider investing in the market. cryptocurrency.
Burry is portrayed as a financial wizard in the book and movie of the same name, "The Big Short," known for his ability to predict crises. In 2008, his hedge fund made billions of dollars from the housing crisis and most recently “Big Short” liquidated almost all of its portfolio in Q2 2022.
However, not all of his predictions were correct.
In May 2017, Burry said people should expect a "global financial crisis" and "World War 3". However, the S&P 500 rallied 20% over the next nine months, and the index peaked in December 2021, up more than 100% over Burry's short price.
As of December 2020, Burry says that the share price of Tesla as “ridiculous” as part of the justification for opening my short position. A 47% rally happened in the 35 days after that comment and the stock Tesla peaked after increasing a total of 105% from Tesla's alleged "absurd" price 10 months later.
Indicators point to a major recession, but it's not yet known exactly when
Undeniably, traders should not dismiss the fact that the US dollar index (DXY) has rallied against other major global currencies to hit a 20-year high. This shows that investors are aggressively seeking a safe haven in cash with the mantra "Cash is King", to escape the stock market, foreign currency and corporate bad debt.
Furthermore, the gap between 2-year and 10-year US Treasuries widened to a record high of -0.57% on September 22. Usually, when shorter-term government bonds are in favor. Higher yields than long-term bonds – a yield curve inversion – are interpreted as increasing signs of a recession.
Adding to the concerns, on September 22, the US Federal Reserve (Fed) report all-time high of $2.36 trillion in overnight reverse repurchase agreements. In a “reverse repo (secured transactions, fully collateralized by government securities, unlike federal funds),” market participants lend cash to the Fed in exchange for the Treasury. U.S. silver and agency-backed securities. Too much cash on investors' balance sheets indicates a lack of confidence in counterparty credit risk, which is a bearish indicator.
After releasing three key macroeconomic indicators that hit levels not seen in more than two decades, two important questions arise. First, Bitcoin (BTC) and Ethereum (ETH) have a relationship with traditional markets? More importantly, what impact should investors expect if the S&P 500 falls 20% and the housing market crashes?
Regardless of whether a person pays their bill with cryptocurrency or not, the prices of energy, food and healthcare services are heavily dependent on the US dollar. International commodity transactions are mostly denominated in dollars, including exports, imports, and physical transactions. So even if a person pays with Bitcoin, this value will be converted into fiat currency.
Dollar borrowing costs impact many economies
The main takeaway from the lack of an efficient circular transaction using only cryptocurrencies is that people's lives depend on the strength of the US dollar and the cost of borrowing. Unless one lives in a cave, isolated in a subsistence land, or on an island, when investors hoard cash and interest rates skyrocket, every market suffers. by USD.
As for the housing market crash or other 20% crash in the stock market, the truth is its impact on Bitcoin and Ether is unpredictable. On the one hand, there is pressure from holders scrambling to reduce their exposure and secure cash positions for the winter. crypto took longer than expected. On the other hand, there could be an uptick in investors seeking non-confiscatable (non-foreclosure) assets or seeking protection from inflation.
That's why Michael J. Burry's story is relevant now that every market pundit and analyst is declaring a near-future market crash or potential crash. of housing prices. Bitcoin and Ether are facing an impending global recession for the first time, and remember back in March 2020, when a sell-off was caused by the impact of the Covid-19 crisis. The most resilient investors over the long term have been rewarded with dozens of times the return.
Do you want to experience a season crypto during the period of world economic crisis for the first time in history?