Everyone interested in finance and crypto must watch a film that depicts real events. Yes, we are talking about Michael Burry, the man behind The Big Short. He took short positions when the real estate bubble burst, and he warned everyone that no matter how big a bubble is, it will eventually burst.
The Big Short in Action
Michael Burry, the famous fund manager known for the book and film The Big Short, held a short position of $1.6 billion at the end of the second quarter, according to the securities report released today. Burry’s Scion Asset Management bought put options worth $739 million nominal value against the popular Invesco QQQ Trust ETF (QQQ.O) and put options worth $886 million nominal value against the SPDR S&P 500 ETF (SPY.P).
Put options are short positions that everyone in the crypto market is familiar with. During the same period, the S&P 500 rose by approximately 39%. Earnings reports from a handful of mega companies like Nvidia and Meta Platforms supported the rally. Burry also increased his holdings in RealReal Inc, iHeartMedia, HanesBrands, and Warner Bros Discovery.
During the same period, Burry sold his holdings in PacWest, Alibaba Group Holdings, and Western Alliance Bancorp.
Cryptocurrencies Could Decline
Although the correlation with the stock markets weakened, this weakness emerged on the upside. If the stock markets decline, it is likely that Bitcoin and naturally altcoins will also decline. Stocks tend to fall when risk appetite in the markets weakens. Many large companies have reduced their workforce in anticipation of a recession in the last two quarters of the year, but we have not yet seen a recession. Barry may have increased his short positions for this reason.
This scenario is consistent with the 2008 crisis. While many major investments and asset management companies are entering the crypto market, Barry is doing the opposite. He did the same before the real estate bubble burst. Back then, the largest banks in the US were claiming that the bubble was too big to burst.
So, who will be proven right? Only time will tell, but if Barry fails this time, it will shatter his charisma from The Big Short.
