Burry says ‘multiple compressions’ were the cause of the crypto market’s decline in the first half of the year.
The popular investors’ comments at a time the S&P 500 500 is suffering its worst first half of the year since 1970.
According to scion asset management co-founder, Michael Burry, the general downturn in the crypto market is still 50 percent over. Burry became popular following his accurate prediction of the US mortgage market collapse of 2008 and a movie about him (the big short). The movie starred a popular actor (Christian Bale).
The popular investor believes that successive compressions caused the huge decline in the S&P 500 500, the Nasdaq, and crypto prices, including bitcoin’s price. Hence, he predicted that the next stage is earnings compression.
Burry makes forecasts about the financial markets
According to Burry, inflation adjustments show that BTC is down 64 percent, S&P 500 500 is down 26 percent, and Nasdaq is down 34 percent for the first half of 2022. Burry had previously predicted that the US Fed would likely change its decision to keep raising rates successively. He said there is a bullwhip effect in action, and it is the cause of the current supply glut at retail.
The bullwhip effect is a wrong estimation of demand. It usually results in a huge reserve of inventories. Burry predicts that the consumer price index will show the effect of the deflationary pulses.
Thus, the federal reserve will be forced to reverse quantitative tightening measures. About 12 months ago, Burry predicted that “the mother of all crashes was about to happen.” His prediction came through as there have been intense selloffs of US bonds and stocks by investors some months after his prediction. The US Fed’s decision to keep raising rates has contributed to these intense sell-offs.
Short-term crypto outlook
The latest data by the bureau of economic analysis states that the core personal consumption expenditures data (PCE) stands at 4.7 percent. The figure indicates a 0.3 percent increase compared to May 2022. However, it was still lower than the prediction from analysts.
Even though the core PCE analysis doesn’t include energy and food, it still shows falling inflation levels. While the CPI is the most popular inflation gauge, the Fed uses PCE data for the same purpose. If the crypto market situation is as it has been since the start of the year, bitcoin will experience its worst quarter in nearly ten years.
Already, its 58 percent drop is its largest since Q3 2021. Bitcoin’s poor performance this year mainly resulted from rising inflation levels and interest rate increases by central banks. The month of July will be crucial for the crypto market and its players.
This month, there is a ruling on the GBTC-SEC case. Also, the US Bureau of Labor Statistics will release CPI data on July 13. In addition, there will be an earnings release for the second quarter of 2022 by July 28.
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