Dr. Michael J. Burry, the hedge fund manager who made a fortune off the subprime mortgage crisis and helped inspire the best-selling book and movie, “The Big Short,” described bitcoin as a “speculative bubble” in a now-deleted tweet.
Bitcoin recently recorded its highest drop ever, trading at a high of $58,000 on Feb. 21 before nosediving to $47,700 within 19 hours. It has more than tripled in price over the past six months.
Burry admitted that bitcoin bulls are right about the cryptocurrency’s relevance, but that doesn’t change the fact that it’s a risky investment.
“$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,” he wrote. “If you do not know how much leverage is involved in the run-up, you may not know enough to own it.”
Burry knows all about bubbles. He earned hundreds of millions of dollars off the 2007 collapse of the housing market and he warned that bitcoin’s recent ascent reminds him of that time.
Burry predicts that a bitcoin crash is coming. Its price levels are unsustainable and buyers have taken on dangerous amounts of debt. He grouped bitcoin in with electric vehicles, software-as-a-service companies, and “meme stocks” such as GameStop and AMC to the housing and dot-com bubbles.
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“Fads today (#BTC, #EV, SAAS #memestocks) are like housing in 2007 and fiber/.com/comm/routers in 1999,” he tweeted. The bitcoin bear’s comments are watched closely by the financial community, and Burry often deletes his tweets, according to Fortune.
There is some justification for the massive buzz, Burry said, but he doesn’t expect it to last.
“On the whole, not wrong, just driven by speculative fervor to insane heights from which the fall will be dramatic and painful,” he said.
On Tuesday, Burry said in a now-deleted tweet that governments could handicap bitcoin to protect their currencies and he doubts cryptocurrencies can disrupt the financial system.
