"The Big Short" Michael Burry Returns: Examining Today's "Bubble" Through 40 Years of Federal Reserve Rate Changes
When mentioning Michael Burry, many people may not be very familiar with him, but if we mention the legendary fund manager played by famous actor Christian Bale in the 2015 movie "The Big Short," everyone becomes much more familiar. The prototype of this legendary fund manager in the movie is Michael Burry.
His Scion Asset Management delivered a gross return of 696.94% to investors between 2000-2008, with a net after-tax return of 472.4%. Of course, his most famous investment was using $600 million to earn $750 million in profits for investors during the 2007 U.S. real estate bubble, which made him famous overnight and earned him the reputation as a Wall Street legend.
Big Short Position on Tesla
After lying low for a long time, Michael Burry's activities have once again attracted the attention of investors in the past year, and this time, he appears again as "the big short." On December 2, 2020, he posted on his Twitter that he was shorting Tesla, pointing out that Tesla's valuation was "absolutely ridiculous" compared to other companies in the industry, and also interacted with Tesla CEO Elon Musk.
Michael Burry Twitter screenshot, source: internet
At that time, Tesla's stock price was soaring, rising from around $100 at the beginning of 2020 to over $700. Affected by this news, Tesla's stock price once fell more than 7%, then the decline narrowed, closing down 2.73% that day. According to a document filed by Scion Asset Management with the U.S. Securities and Exchange Commission on May 17, 2021, Michael Burry had purchased 800,100 Tesla stock put options worth $534 million by the end of the first quarter.
Doesn't "Hate" Crypto Assets, But "Be Vigilant of Risks"
In addition to traditional financial markets, Michael Burry has also noticed the rapidly developing crypto asset market in recent years. Unlike his firm bearish stance on Tesla, Michael Burry's attitude toward Bitcoin and other crypto assets is much more tolerant. He previously stated that he does not "hate" Bitcoin and other crypto assets, but at the same time expressed concerns that the consistently high volatility of the crypto asset market may attract the attention of regulators.
Michael Burry Twitter screenshot, source: internet
In February this year, he once again issued a reminder to investors through his Twitter account: the high leverage in the crypto asset market is a big problem, and investors need to have a full understanding of this before investing. At that time, Bitcoin's price had just broken through $50,000 for the first time and was launching an assault on $60,000. From a hindsight perspective, the timing of Michael Burry's reminder is highly similar to the timing when he first publicly shorted Tesla.
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Bitcoin price trend in the first half of 2021, source: OKX
However, if we dig deeper along Michael Burry's series of tweets, it's not difficult to find the shadow of him shorting Bitcoin. Since Tesla CEO Elon Musk himself has played the role of "Bitcoin flag bearer" for most of this year and is a Bitcoin supporter with considerable influence, and according to Tesla's first quarter financial report, the company purchased and holds more than 40,000 Bitcoin , accounting for a considerable proportion of its balance sheet. So from this perspective, we have reason to speculate that in Michael Burry's more than $500 million short position on Tesla, in addition to the publicly mentioned reason that Tesla's valuation is "absolutely ridiculous," bearishness on Bitcoin is also an important reason that prompted him to make this decision.
"The Bubble is Caused by Fed Rate Cuts in the Major Cycle"
In addition to the factors mentioned above, Michael Burry also gave a deeper reason for his bearishness on "bubble" investment targets such as Tesla. He believes that whether it is the "bubble" in the crypto asset market or the "bubble" in stocks of companies like Tesla, they are essentially the result of the Federal Reserve's continuous interest rate cuts and increased liquidity since the 1980s.
Michael Burry Twitter screenshot, source: internet
In Michael Burry's tweet, he specifically mentioned the time point of October 19, 1987. On this day, the S&P index fell 20% and the Dow Jones Industrial Average fell 22%, known as "Black Monday" in the U.S. stock market. So why go back 40 years? We still need to return to the Federal Reserve's interest rate policy that we have been paying close attention to. If we extend the Federal Reserve's interest rate changes to 50 years, we will find that the 1980s was the period with the highest interest rates in nearly half a century, with the interest rate level exceeding 20% in 1980, followed by a 40-year cycle of fluctuating decline, down to the recent 0.25%.
Federal Reserve interest rate changes over the past 50 years, source: tradingeconomics
At the same time, the U.S. money supply M2 has also entered a rapid growth phase since 1980, growing from around $2 trillion to over $20.37 trillion this year.
U.S. money supply M2 changes over the past 50 years, source: tradingeconomics
Loose policies in terms of capital and currency, as well as declining interest rates, can be said to be the major trend over the past 40 years. This is a deeper reason mentioned by Michael Burry for his bearishness on Tesla. According to this view, if we separately circle the corresponding periodic highs in the Federal Reserve interest rate change line chart—1999-2000 and 2007-2008—they can also be precisely matched with the well-known internet bubble period and the U.S. subprime mortgage crisis.
Of course, the data we have provided above is more from the perspective of those who came later, following the map to find the way. Some views are also derived from the series of tweets by "the big short" Michael Burry. The future development trend of the crypto market and even the global financial market is still full of uncertainty. What we can do at this stage is to learn as much as possible from history, stand at the height of the future, and use a developmental perspective to solve current problems.
Disclaimer
This article may contain content related to products that are not available in your region. This article is only committed to providing general information and is not responsible for any factual errors or omissions. This article only represents the author's personal views and does not represent OKX's views. This article is not intended to provide any of the following advice, including but not limited to: (i) investment advice or investment recommendations; (ii) an offer or solicitation to buy, sell or hold digital assets; or (iii) financial, accounting, legal or tax advice. Holding digital assets (including stablecoins) involves high risks and may fluctuate significantly or even become worthless. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. For questions about your specific situation, please consult your legal/tax/investment professional. Information appearing in this article (including market data and statistical information, if any) is for general reference only. Although we have taken all reasonable care in preparing this data and charts, we assume no responsibility for any factual errors or omissions expressed herein. © 2025 OKX. This article may be reproduced or distributed in its entirety, or excerpts of 100 words or less from this article may be used, provided that such use is non-commercial. Any reproduction or distribution of the entire article must also prominently state: "This article is copyrighted © 2025 OKX and used with permission." Permitted excerpts must cite the article name and include attribution, such as "Article Name, [Author Name (if applicable)], © 2025 OKX". Some content may be generated or assisted by artificial intelligence (AI) tools. Derivative works or other uses of this article are not permitted.
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