What will happen to Bitcoin and Ethereum if traditional markets break?

Michael J. Burry is a financial wizard, who was featured in “The Big Short”. He is well-known for his ability to predict crises. Burry sold almost all of his portfolio in the 2Q 2022, after his investment fund lost billions to the 2008 housing crash.

It is possible to invest in cryptocurrency now, even though no one knows if traditional markets will rebound before moving into a more negative environment. Here are some examples of how even the most experienced investors can miss spectacular rallies.

Burry stated in May 2017 that people should prepare for a “global financial meltdown”, and World War 3. The S&P 500 gained 20% in the nine months that followed. The index reached its peak in December 2021, a few years later. This was more than 100 percent above Burry’s recommended short entry price.

Burry stated that Tesla’s stock prices were “ridiculous” in December 2020 as part of his justification to open his short position. After that comment, a 47% rally took place in 35 days. Tesla shares peaked 10 years later after a total gain of 105% from Tesla’s “ridiculous” price.

Although indicators point to a severe recession, the exact timing of that is unknown.

Traders should not overlook the fact that the U.S. Dollar index has rallied against major global currencies to reach its highest point in 20 years. This indicates that investors are desperate for shelter in cash, exiting stock market, foreign currencies, and corporate debt.

The gap between U.S. Treasury 2y year and 10 year notes increased to an all-time high of -0.57% on September 22. Inverted yield curves are a sign of recession. Shorter-term government bonds typically have higher yields that long-term bonds.

The U.S. Federal Reserve reported a record $2.36 trillion in overnight reverse purchase agreements on Sept. 22. Market participants lend money to the FED through a “reverse repos” in exchange for U.S. Treasuries or agency-backed securities. An indicator of a lack trust in counterparty credit risk is excessive cash in investors’ balances.

Two important questions remain after we have laid out the three key macroeconomic indicators at levels never seen for over two decades. First, how do Bitcoin (BTC), Ether (ETH), relate to traditional markets. What impact can investors expect if the S&P 500 falls 20% and the housing market crashes, more importantly?

No matter how cryptocurrencies are used to pay bills, the U.S. Dollar is a major determinant of energy prices, food, and healthcare services. International commodity transactions are mostly priced using USD. This includes imports and exports as well as the actual trading. Even if you pay your expenses with Bitcoin, the odds are that this currency will eventually be converted to fiat money.

Multiple economies are affected by USD borrowing costs

The lack of a circular trade that uses cryptocurrencies only is the main lesson. Everyone’s lives depend on the strength and affordability of the U.S. Dollar. Every market is affected, unless one lives in a cave, in an isolated area of a self-sufficient country, or on a communist island.

It is impossible to predict the impact of a possible housing market collapse on Ether and Ether. From one side, there’s the pressure from holders scrambling to reduce their exposure and secure a cash position for an eventual longer-than-estimated crypto-winter. Investors could look for non-confiscatable assets and protection against inflation on the other side.

Michael J. Burry’s tale is relevant now that every market analyst and pundit claims a near future market collapse or a crash in housing prices. Bitcoin and Ether face a global recession. This is the first time that Ether and Bitcoin have faced an imminent global recession.

com. You should do your research before making any investment or trading decision.

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