The crypto-currency market is crashing today. Bitcoin is showing extremely downward trends. It has fallen more than 5% in the last 24 hours and is currently trading at $18,653. The crypto-currency crash has prompted expert investor, Michael Burry, to predict a 2008-level economic crisis.
Why is Michael Burry predicting an economic crisis?
Michael Burry’s economic crisis prediction is based on multiple factors. His prediction came just after the crypto-currency market crash. Over the past seven days, bitcoin has fallen more than 8 percent. Despite a successful start to the Ethereum merger, ETH prices are showing extremely bearish trends. ETH has fallen nearly 9% in the last 24 hours.
Other altcoins such as Dogecoin, Solana, Polkadot, MATIC and Ethereum Classic have also fallen by 8-10%.
The crypto-currency crash is just one of the factors fueling Michael Burry’s prediction. He also points to the SPAC market crash. The special purpose acquisition company market peaked in 2021, but has struggled massively thereafter.
Crypo crash. Check
Meme crash. Check.
SPAC crash. Check.
– Cassandra B.C. (@michaeljburry) September 7, 2022
One of the most important factors in his prediction is the current inflation crisis. The Consumer Price Index shows that inflation is at record levels. The Federal Reserve is engaging in quantitative tightening and interest rate hikes to combat inflation.
In the recent Jackson Hole speech, Fed Chairman Jerome Powell asked households and businesses to be prepared to suffer from the Fed’s fight against inflation.
What is the outlook for the economy?
The U.S. economy is going through a difficult phase. Not only is it facing record inflation, but the threat of a recession is also looming. The market will be paying close attention to the upcoming CPI release. Back-to-back inflation data has shown a cooling in inflation.
The CME Fed Watch tool currently projects a 75% probability of another 75 bp interest rate hike. Another favorable CPI reading could temper the Fed’s aggressive stance.