Is Bitcoin the next “Big Short”?

Bitcoin is an ungoverned and uncontrolled online currency. But with great freedom comes great volatility.

Michael Burry foresaw the 2008 subprime mortgage crisis. 2015's The Big Short focuses on Burry and his short position at the time.

2008 subprime mortgage crisis prophet Michael Burry believes Bitcoin is headed for a severe tumble... Should we heed his warning this time?

#BTC is a speculative bubble that poses more risk than opportunity... If you do not know how much leverage is involved in the run-up, you may not know enough to own it.”— Michael BurryNEW YORK CITY, NEW YORK, UNITED STATES, March 5, 2021 / -- According to American investor and hedge fund manager Michael Burry, Bitcoin is a massive speculator bubble which will soon collapse. Michael Burry, whose name may be unfamiliar to some, was the central character of 2015’s biographical drama The Big Short. The film centres around Burry’s (played by Christian Bale) ability to foresee and profit off of the 2008 subprime mortgage crisis.

Burry was correct about the crash of 2008, and while this does not necessarily indicate that he will be correct about the future of Bitcoin, Burry stands alone as a voice of sober second thought. Bitcoin’s prices have exploded over the past several months.

In September of 2020, a single Bitcoin cost $13,000 to $14,000 CAD ($10,000 - $11,000 USD). However as of March 1st, 2020, a single Bitcoin cost $61,300 CAD ($49,500 USD). This is a nearly 370% increase in the price of a single Bitcoin in only seven months. The rapid rise of the online currency commodity alone should signal some serious hazard signs to investors alone, much akin to the recent rise of Tesla (of which Burry also warns against and owns short positions for).

But is Burry correct in his assessment of the situation, or is he out of touch with the direction society, trading, and commerce is heading towards. Recently, more and more companies are adopting Bitcoin as an acceptable form of payment. PayPal and Tesla are two notable business giants which have recently stated customers can utilize Bitcoin when paying for their services or products.

The fact that Bitcoin is a completely autonomous virtual currency, free from the control of any government or central bank, is very attractive to it’s advocates and owners. It is a global currency with a uniform global value, untouched by interest rates, monetary supply, or economic regulation.

At the same time, this is what makes the currency extremely volatile and highly speculative, as Burry argues. In a tweet published March 2nd Burry writes, “#BTC is a speculative bubble that poses more risk than opportunity despite most of the proponents being correct in their arguments for why it is relevant at this point in history, If you do not know how much leverage is involved in the run-up, you may not know enough to own it.”

Essentially, Burry is not arguing that Bitcoin holds no merit or value, but that investors caught up in the hype of the virtual currency could be horrendously blindsided if the volatile currency were to tumble.

Perhaps the long term issue with Bitcoin is not its unpredictability but the fact the item is traded like a stock rather than a currency. The computing power needed to mine a Bitcoin and its current astronomical value leaves it far from the reaches of average consumers. Until it is viewed as a common currency, and treated as such, it will remain a highly speculative and volatile commodity, vulnerable to collapses like Burry issuing warnings for.

Want to learn more? Visit The Financial News for the latest on finance, economics, and stock information!

This piece was written by Nicolas Minardi from Mrkt360.

Nicolas Minardi
The Financial News

Data & News supplied by
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.