Michael Burry, one of the Tradfi banking industry’s most notorious bears, just put a $1.6 billion hit out on the U.S. stock market. What happens to bitcoin while the grownups are fighting?
The Scion Capital founder, who famously shorted mortgage-backed securities before the 2007 housing crisis, just gave the stock market a $1.6 billion shove of puts in SPY and QQQ!
Steve Anderson writes at TipRanks:
“Michael Burry made a name for himself by shorting the market to the point where they made a movie about him called ‘The Big Short.’ But is he preparing for a time when lightning will strike twice?”
During the U.S. subprime mortgage crisis, big bets against Wall Street’s housing market earned Burry $100 million in personal profit. His big contrarian trade made some $700 million in profits for his clients.
Earlier this year, he flipped bullish and bought a bunch of finance stocks, but the market wizard behind Scion Capital is apparently very certain of a near-term stock market crash.
The sheer percentage of his portfolio Burry has devoted to this trade shows far more conviction than his long positions in banks earlier this year.
What could it mean for bitcoin’s price?
Stocks and bitcoin have followed various correlation regimes, but it’s clear there’s some correlation. An event as massive as one Burry’s trade anticipates would be so global it would undoubtedly impact BTC.
Most likely, a sell-off would ensue on the net as investors go for cash to make up for equities losses or go bargain hunting for stocks. But it could result in a rocketing resurgence of bitcoin’s price when stocks recover.
That’s what happened in 2020, when gains on Wall Street were matched by bitcoin gains, only with massive leverage in the percentages.
While the market does digest news faster than ever, Scion’s big short is no cause for immediate alarm. It took years for the housing market to unwind, so a bear market as bad as Burry is predicting could be some time off yet. Additionally, he has had quite a few wrong predictions in the past.