Crypto investor Michael Novogratz is drawing parallels between crypto and Lengthy Term Capital Management, a extremely leveraged hedge fund that blew up within the late Nineteen Nineties.
“We are going through what feels to me a little bit like a Long Term Capital Management moment in crypto,” Novogratz mentioned on CNBC’s “Squawk Box.” “It was the big hedge fund with all the leverage, and when it started unwinding, there was repercussions everywhere. We are seeing that in the crypto space right now.”
Lengthy-Term Capital Management was a hedge fund that quickly collapsed within the late Nineteen Nineties, rippling by way of the monetary system due to Wall Avenue funding banks’ publicity to the fund. It was bailed out by the Federal Reserve.
Novogratz, CEO of Galaxy Digital, cited Celsius, a controversial cryptocurrency lending platform that paused all withdrawals on Monday, in addition to the collapse of the Terra challenge.
“That’s causing a lot of damage around the system. That’s causing deleveraging that’s accelerated,” Novogratz mentioned.
The longtime crypto investor mentioned he believes a backside is probably going close to for bitcoin and different digital tokens. Bitcoin briefly dropped beneath $21,000 on Tuesday, persevering with its plunge as buyers offered off threat property.
“We’ve gone to the level that should be close to a bottom. $21,000 bitcoin $1,000 ethereum. There’s been a tremendous amount of capitulation and fear,” Novogratz mentioned. “Usually not a good area to sell, but it doesn’t mean we can’t go lower. I think the macro environment is still pretty challenging out there.”
Bitcoin has fallen almost 70% from its all-time excessive in November 2021.