Michael Burry, famous for his 2008 mortgage crisis prediction, evaluates what will happen in the Bitcoin, SHIB and altcoin markets as a result of the economic repercussion from the Federal Reserve’s interest rate hikes.
Crisis seer sees Fed reverse rate hikes
Michael Burry replied to a CNN article about large retailers like Walmart and Target having excess inventory. In his own article, he said that the Bullwhip effect (Whiplash effect) is responsible for the abundance of retail supply. He also says the Customer Price Index will show signs of deflation. If true, this will force the Fed to scale back its quantitative tightening program and rate hikes.
Fear of rising inflation has led to significant losses for Bitcoin and cryptocurrencies. In response to the Federal Reserve’s hike in interest rates, the market fell further.
Therefore, a drop in inflation and a change in the Fed’s policy could cause the cryptocurrency market to recover. But the latest data show that inflation is far from slowing down. In fact, May’s figure of 8.6% was the highest in more than 40 years.
What is the whip effect? How does Bitcoin and it trigger the markets?
The bullwhip effect is a supply chain phenomenon that explains how small fluctuations in retail demand can cause increasingly large fluctuations. The effect is named after the physics involved in breaking a whip. When the person holding the whip breaks their wrist, the relatively small movement causes the wave patterns of the whip to gradually increase in a chain reaction.
In this context, the supply chain’s overestimation of demand due to erroneous or short-term data leads to the “bullwhip effect”. This often results in an inventory buildup at every link in the supply chain. A dramatic drop in product prices is brought about by the resulting abundance of supply.
Everyone is worried about the outcome, not just Burry, played by Christian Bale in “The Big Short.” According to Tom Lee, head of research at FundStrat, the bullwhip effect is quite likely to be confused with inflation by the market. The Fed has reached its biggest rate hike since 1994. However, the economy is also greatly affected by it. A longer recession is due to the negative feedback loop of higher interest rates and rising inflation.
Interest rate reversal is a good sign for cryptocurrencies
As Cryptokoin.com reported, the increase in interest rates and inflation caused significant losses in the cryptocurrency market. However, the cryptocurrency is expected to continue its rise once inflation is under control. Panther Protocol co-founder Oliver Gale thought that inflation was only temporary and would soon pass.
But whether inflation can actually be controlled in the short run remains to be seen. The market has risen in the last two years due to loose monetary policy. However, the industry has never seen a high interest rate environment.
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