In news of the “Duh” variety, mega investor Michael Burry has been on record over the past year advising people to get out of the crypto market. A 77% drop in Bitcoin value in the last year (per Fortune) and FTX’s $32 billion crash (per Barron’s) seem to indicate that the financial seer might have been on the right track.
Burry is already famous for his prominent role in Michael Lewis’ The Big Short (and subsequent portrayal by Christian Bale in the subsequent Adam McKay film) as the man who shorted a booming real estate market before its 2008 crash almost caused another Great Depression. In 2022, Burry followed his doomsday prophecy for real estate with another prediction: the crypto crash.
Yahoo Finance reported that Burry cautioned investors that the crypto market was experiencing the “greatest speculative bubble of all time in all things,” and that the “mother of all crashes” was on the horizon for cryptocurrency investors. Crypto is designed to be an alternative to big banks, a translucent financial instrument that operates outside of the mainstream, allowing individuals, organizations, and governments access to capital funding that’s not overseen by fat cat bankers. Turns out, there’s just as much greed and corruption in unregulated markets as there is in those supposed to be overseen by the United States Securities and Exchange Commission.
Why was Barry able to predict this when investors from BlackRock to El Salvador’s President Nayib Bukele weren’t? The answer is avarice and obstinance in the face of doubters, exemplified by the acronym FUD — fear, uncertainty, and doubt. Doubters were silenced as doomsayers, neophyte Cassandras who knew nothing about the blockchain or the cresting digital wave. Unfortunately, those who claimed that cryptocurrency prices would only continue to climb are now crushed under the weight of their own hubris.
“The very acronym FUD served to minimize the folly in which so many engage,” Burry posted on Twitter on Nov. 8. “No matter how logical an argument, if contrary to the bullish narrative, it deserved scorn as FUD. Well. Well. Well.”
— Cassandra B.C. Backup (@michaeljburryBC) November 8, 2022
According to The Street, Burry also tweeted, “The problem with #crypto, as in most things, is the leverage. If you don’t know how much leverage is in crypto, you don’t know anything about crypto, no matter how much else you think you know.”
Not only did Burry bail on crypto, but foresaw the massive tech correction that would follow. According to a 13F disclosure (a required quarterly report from investment managers) filed by Burry’s Scion Asset Management with the SEC on August 15, the hedge fund dumped around $292 million worth of shares of tech giants like Apple and Meta and pharmaceuticals megaliths Bristol-Myers Squibb. Noting that President Biden hired 87,000 new IRS agents, Burry reinvested a portion of those funds 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
Investors who have yet to lose their pants (or are at least trying to keep their undergarments) might do well to heed Burry’s advice and get out of the way while big tech adjusts to a dwindling post-pandemic demand and the SEC/federal legislators sort out how to regulate crypto markets.