Mike Novogratz says the crypto market is nearing a bottom

    15 Jun 2022

    Mike Novogratz, the CEO of the institutional crypto investment firm Galaxy Digital, said that the bottom might be near after the recent market turmoil. He is drawing parallels between crypto and Long Term Capital Management, a highly leveraged hedge fund that blew up in the late 1990s.

    “We’ve gone to a level that should be close to a bottom. $21,000 Bitcoin, $1,000 Ethereum,” Novogratz told CNBC on Tuesday. “There’s been a tremendous amount of capitulation and fear. Usually not a good area to sell.”

    The CEO added that cryptocurrencies could still sink lower amid a challenging macroeconomic environment of persistent inflation and rising interest rates, but he remains bullish over the long run.

    He went on to compare the recent collapse of the TerraUSD stablecoin and the controversial halt of withdrawals by the crypto lending platform Celsius to the blow-up of Long Term Capital Management (LTCM) in the 1990s.

    LTCM was a highly-leveraged hedge fund that outperformed much of its competition in the 90s, until exposure to the 1997 Asian financial crisis and the 1998 Russian financial crisis led the fund to lose $4.6 billion in a matter of months in 1998. LTCM was eventually bailed out by a group of 14 banks in a deal brokered by the Federal Reserve, but its blow-up led to reverberations across the stock market as its highly levered bets on risky stocks collapsed.

    “We are going through what feels to me a little bit like a Long Term Capital Management moment in crypto,” Novogratz said on Tuesday. “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.”

    Nevertheless, despite the dark days for the industry, Novogratz remains confident in the future of cryptocurrencies.

    “I firmly believe, now more than ever, that the crypto revolution is here to stay,” he wrote on May 19 in a letter to shareholders, partners, and the crypto community.

    Novogratz isn’t the only cryptocurrency bull who is calling a market bottom either. Fundstrat’s Tom Lee said on Tuesday that if the 2022 drawdown follows a similar pattern to a brief crypto decline in 2021, Ether could bottom at $873 over the next week.

    “Overall, ETH-USD looks quite attractive to buy and hold, possibly providing an ideal entry point within a week,” he wrote in a note.

    However, if Lee is right, it would mean Ether still has another roughly 27% drop ahead from current levels.

    Still, while crypto bulls continue to stand by their views, some industry skeptics argue what we are seeing is just the end of another bubble blown due to unsustainable Federal Reserve policies of near-zero interest rates and quantitative easing.

    Meanwhile, Bitcoin has fallen nearly 70% from its all-time high in November 2021.

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