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Michael Burry, the famous investor who bet against the housing bubble in 2008, has sold almost all of the stocks in his portfolio during Q2. This suggests that the stock and cryptocurrency markets may be in for a rough time.
According to a 13F disclosure filed with the Securities and Exchange Commission (SEC) on August 15, Burry's hedge fund Scion Asset Management sold about $292 million worth of shares in companies like Apple and Bristol-Myers Squibb, leaving only a small 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 there is a strong link between Bitcoin (BTC) and crypto and the stock market, especially when it comes to macroeconomic events like interest rate hikes by the Federal Reserve and the conflict between Russia and Ukraine, Burry's bearish outlook on stocks may also be a warning sign for the crypto sector.
But when Cointelegraph asked if Burry's moves could mean bad news for the crypto markets, Quantum Economics founder and CEO Mati Greenspan said he wasn't too worried, even though Burry has a history of predicting bad things will happen.
Greenspan said that it's almost impossible to predict when and how bad a crash will be. He also said that there's usually always something bad coming up that could cause stock and cryptocurrency prices to crash.
"It's a lot like predicting an earthquake to say that the stock market will crash. You know they will happen from time to time, but you never know when or how bad they will be."
He also said that investors shouldn't believe every piece of FUD that goes around online. He said, "Investing is a long-term game, and people who jump at shadows don't usually do well."
This month, Burry warned investors that "winter is coming," even though crypto and stocks had recently gone up. He said that this was because U.S. consumer credit rates were going up by $40 billion per month, which was more than the average of $28 billion per month in the past.
Garret Duyck, a Seeking Alpha analyst, disagreed with Greenspan. He wrote in an article on August 16 that investors may want to pay attention to Burry's worries about consumer credit, housing, and business conditions.
"When Michael Burry is a bear, I pay attention, and right now he is a big bear. By selling off all but one of the positions in his portfolio, he puts his money where his mouth has been: out of the market.
"The big picture data seems to back up his theory. I'm seeing signs of weakness everywhere. The consumer is having a hard time, and the housing market and business conditions point to a weak job market. Earnings estimates are too high, and negative earnings will have a big effect on already inflated stock prices," he said.
Burry's forecasts
Since 2008, when he made a name for himself by betting against the housing bubble, Burry's predictions haven't always come true. However, some of his most recent predictions about crypto have mostly come true.
For example, in March 2021, Burry called Bitcoin (BTC) a "speculative bubble that presents more risk than opportunity." He said this because he thought a crash was coming soon. This happened at the same time as the price of BTC dropped from $59,000 in March to around $34,000 by the end of May.
In June, he called the price changes in the stock and cryptocurrency markets the "Greatest Speculative Bubble of All Time in All Things." And even though BTC reached a new ATH of around $69,044 in November, no one needs to be reminded of how much the market has dropped since then.