Yesterday, Michael Burry predicted a 2008-level economic catastrophe

Michael Burry based his predictions on the collapses of the crypto-currency market, meme stocks and SPACs. He believes that inflation, which is slowing down slightly, will rise again.

Inflation appears in spikes. When the spike is resolving, it won’t be because of Biden or Powell. It will be because that is the essence, the nature of inflation. It resolves, fools people, and then comes back. When it comes back, neither the POTUS nor the Fed will take credit. pic.twitter.com/aI95jnMM0X

– Cassandra B.C. (@michaeljburry) September 7, 2022

Michael Burry believes that inflation works in spikes. The temporary relief is not the result of an improving economy, it is because that is its nature. He also refuses to credit the Biden administration or the Fed for the decline in inflation levels.

The U.S. Consumer Price Index for August, a strong indicator of inflation, will be released on September 13.

How inflation is affecting crypto-currencies

Inflation has a significant impact on the crypto-currency market as it is highly correlated with the general market and is largely affected by macroeconomic factors. The Federal Reserve is responsible for controlling inflation levels in the United States. It usually does so through interest rate hikes and quantitative tightening.

High interest rates can cause the stock and crypto-currency markets to fall. A higher-than-usual interest rate hike in June caused a major collapse in the crypto-currency market. Back-to-back inflation data highlighted a slight slowdown in inflation. U.S. inflation data released in August was lower than estimated.

Similarly, personal consumption expenditure data released in August also showed the same trend. Despite this, the Federal Reserve has maintained its hawkish stance. The Fed is targeting a 2% inflation level and will maintain its hawkish attitude until that point.

If Burry’s warning holds true, the Fed may take an even tougher stance. Many experts already fear a 100 basis point rate hike at the September FOMC meeting.

Michael Burry thinks the bottom has not been reached

Michael Burry’s warning doesn’t end there. He also predicts that the bottom of the crisis has not been reached. The bottom will be reached, he says, when large-scale defaults are observed in all sectors. The failure of two SPACs ETFs is not enough to call it a bottom, he says.

It is unclear whether Burry considers the massive liquidity crisis in the crypto industry a failure or not.