Michael Burry, a veteran investor and founder of Scion Asset Management, issues another dire warning for the economy. Burry predicted a 2008-level economic disaster last night. He based his predictions on crashes in Bitcoin, the cryptocurrency market, and the SPAC market. He believes that slightly cooling inflation will warm again.
Why does Michael Burry think the bottom hasn’t come yet?
Burry believes inflation has spiked. Temporary relief is not a result of the economy’s recovery, but its nature. It also refuses to give credit to the Biden administration or the Fed to reduce inflation levels.
August Consumer Price Index, a strong indicator of inflation, will be released on 13 September.
How does inflation affect Bitcoin and the cryptocurrency market?
Inflation has a significant impact on the crypto market. The crypto market is strongly associated with traditional markets and is heavily influenced by macroeconomic factors. The Federal Reserve is responsible for controlling inflation levels in the United States. It usually does this through rate hikes and quantitative tightening.
High interest rates could cause the stock and crypto market to decline. A higher-than-normal interest rate hike in June caused a massive crash in the crypto market. Back-to-back inflation data highlighted a slight cooling in inflation. CPI data announced in August remained below the forecast.
Similarly, the Personal Consumption Expenditures data released in August showed the same trend. Despite this, the Central Bank maintained its hawkish stance. The Fed is targeting an inflation target of 2% and will maintain its hawkish stance until this point.
If Burry’s warning holds up, the Fed could take an even stronger stance. Many experts are already fearing a 100 basis point hike at the September FOMC meeting.
Michael Burry says we haven’t seen the bottom yet
Michael Burry’s warning does not end there. He also guesses that the bottom is not inside. According to Burry, the bottom will be inside when large-scale failures are witnessed across industries. Also, the failure of two SPAC ETFs isn’t enough to spell a bottom. It is unclear whether Burry saw the massive liquidity crisis in the crypto market as a failure.
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