- Michael Burry has taken a stand against the S&P 500 and NASDAQ 100 indices.
- The current bearish market could lead to a shift to active investing in crypto assets.
Michael Burry’s Bearish Stance on the Current Market
‘The Big Short’ fame, Michael Burry is again in the headlines after he bet against the S&P 500 and NASDAQ 100. With his astonishing position in put options, Burry could send waves across the investment landscape, but the question is, will this have any effect on crypto, more specifically on Bitcoin?
Burry’s Scion Asset Management has taken a bearish stance in put options with a total value of $1.6 Billion against the S&P 500 and NASDAQ 100, which has left the crypto world flabbergasted. As of August 16, the S&P 500 is up by 17% and the NASDAQ 100 by 39%; these numbers seem relevant, but Burry still thinks otherwise.
Since the regulatory filings do not disclose the details of any trade, the real reason behind Burry’s move remains a question mark. This leaves a thought in everyone’s mind, will the 2008 situation repeat itself, or is it just a hedging strategy?
Will Michael Burry’s Stunt Result in a Bullish Run for Bitcoin?
The short position held by Michael Burry could result in a price surge for Bitcoin; this would be similar to the rally witnessed during the US regional bank crisis in January 2023. Now again, as the US stock market is showing signs of vulnerability and the chances of an upcoming bear market increase, investors are likely to consider alternatives to accommodate their investments.
Despite the fact that there is a higher risk of both winning and losing, people prefer investing in Bitcoin and other cryptocurrencies since they provide a rapid option to generate money. Bitcoin is now being bought and sold for $28,496. The increase from the beginning of the year is 72.52%.
Irrespective of market scrutiny and the mundane performance of the market, Bitcoin continues to grow stronger. Additionally, the current optimism around Bitcoin is emphasized by the discussions on its ETF (Exchange Traded Fund) approval. If this happens, then Bitcoin’s position in the world of finance will be unshakeable and will provide a wider investment scope.
Bitcoin vs Traditional Index Funds
The dynamics between Bitcoin and traditional index funds like the S&P 500 and NASDAQ 100 have gained the attention of investors and financial analysts. In 2022, the correspondence between these two financial instruments was often talked about. However, the year 2023 is not how it was supposed to be for Bitcoin and indices’ correspondence. Contrastingly, the relationship has become more complex and tedious.
At the time of writing, the correlation between Bitcoin and the S&P 500 has surprisingly declined by -0.38, compared to a positive correlation of 0.55 in the month of July. In the same way, the correlation between Bitcoin and NASDAQ went haywire from 0.54 to -0.06.
Concerning Factors
It won’t be appropriate to name a single factor that’s the cause of this situation; there are a number of factors that are in play, the major one being the ripple effect on the crypto scenario caused by rising inflation, monetary policies by the central banks, and more.
Changes in crypto regulations by the US Securities and Exchange Commission (SEC) and the EU’s introduction of a new crypto framework called MiCA (Markets in Crypto Assets) are an inherent part of this complex interplay.
