"Bitcoin Plunges…Shockwaves Could Hit Financial Markets"

Burry: "Not serving as a hedge"

Michael Burry, the protagonist of the film 'The Big Short' who predicted the 2008 financial crisis, warned that Bitcoin’s steep selloff could send shockwaves through broader financial markets.

According to Bloomberg on the 3rd (local time), Burry said in a newsletter, “A terrible scenario is now on the verge of becoming reality,” adding, “If Bitcoin falls another 10%, companies like Strategy that hold large amounts of Bitcoin will suffer billions of dollars in losses, and fundraising in capital markets will effectively be shut off.”

Bitcoin has extended its sharp decline since last week. According to Coinbase, the price of one Bitcoin briefly fell to around $72,000. That is the lowest level in about 15 months.

Burry argued that Bitcoin has failed to establish itself as a hedging (risk-avoidance) instrument like gold. He noted, “Cryptocurrencies have revealed themselves to be purely speculative assets,” adding that they “failed to respond to traditional bullish drivers such as a weaker dollar or heightened geopolitical risks.”

Burry also pointed to Bitcoin as the reason behind the recent simultaneous plunge in gold and silver. He argued that as Bitcoin prices tumbled, companies and speculators liquidated profitable gold and silver positions to cover losses. Still, some say cryptocurrencies’ market share is not large enough for this episode to ripple across the entire financial system.

Reporter Han Myung-hyun wise@hankyung.com