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Crypto slides as Michael Burry predicts tech stocks crash

·3-min read
crypto NEW YORK, NY - NOVEMBER 23:  Michael Burry attends the
With bitcoin and ethereum's close ties to the Nasdaq, Burry's gut for predicting crashes could spell grim tidings for the entire crypto ecosystem. Photo: Jim Spellman/WireImage

The crypto market stumbled to a stand-still on Wednesday after an exuberant break-out at the beginning of the week, again showing a tendency to hold the hand of the Nasdaq (^IXIC) as it falls into the red.

On Wednesday, bitcoin (BTC-USD) followed the Nasdaq lower after it was revealed that The Big Short investor Michael Burry executed a significant stock manoeuvre that was undeniably bearish.

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Filings revealed that Burry's Scion Asset Management dumped all of its equities in the second quarter bar one — a company that runs prisons and mental health facilities.

If the man that predicted the 2008 sub-prime crash is correct, any bull run ambitions for blue chip cryptocurrencies such as bitcoin and ethereum (ETH-USD) could be derailed.

Watch: Michael Burry's hedge fund invests in GEO Group

The hedge fund manager, who was characterised by Christian Bale in The Big Short, sold all 11 equities under his management, including prime tech stocks such as Apple (AAPL), Meta (META) and Alphabet (GOOG).

The only remaining stock was in Geo Group Inc (GEO), the world's second-largest private prison company. After the move, shares in Geo Group rose 12% on Monday, the largest one-day rally for the company since June 2021.

With such a dramatic market move, Burry has put his money where his mouth is and articulated a stark calculation that "winter is coming" for the global economy, and security facilities will be in high demand.

Scion Asset Management folded a hand that was weighted heavily with tech stocks, and with bitcoin and ethereum's close ties to the Nasdaq, Burry's gut for predicting crashes could spell grim tidings for the entire cryptocurrency ecosystem.

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The Nasdaq slid on Wednesday, down 25.50 points, or 19%, to 13,102.55. The correlation between tech stocks and the cryptocurrency ecosystem reaffirmed itself again, with blue chip cryptocurrencies slipping after a positive start to the week.

Bitcoin dipped 1% in the last 24 hours, following below the $24,000 mark to $23,910 as of the time of writing.

Ethereum slowed the pace of its break-out run ahead of the upcoming "merge" to a proof of stake validation process. The "smart contract" blockchain only saw a slight rise of 0.4%, to sit at $1,897.

On Sunday, Burry claimed on Twitter (TWTR) that the 18% gain in the tech-heavy Nasdaq since the start of the third quarter is likely to reverse.

He wrote: "Can't shake that silly pre-Enron, pre-9/11, pre-WorldCom feeling."

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Here he referred to three events which contributed to an approximately 75% decline in the Nasdaq between February 2000 and September 2002.

He added that his bearish sentiment was reinforced by data which placed the total US consumer credit card debt at an all-time high of $1.13tn.

On 12 August he tweeted: "Consumers choose violence rather than cut back on spending in the face of inflation."

Burry added: "Remember the savings glut problem? No more. COVID helicopter cash taught people to spend again, and it's addictive. Winter is coming."

Michael Burry rose to fame with timely bets against the housing market ahead of the 2008 financial crisis.

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