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Novogratz Says Crypto Has a “Long-Term Capital Management Moment”

Michael Novogratz

Anjali Sundaram | CNBC

Crypto investor Michael Novogratz draws parallels between crypto and Long Term Capital Management, a highly leveraged hedge fund that boomed in the late 1990s.

“We’re going through what seems to me a bit like a long-term capital management moment in crypto,” Novogratz said on CNBC’s “Squawk Box.” “It was the big hedge fund with all the leverage, and when it started to unfold there were repercussions all over the place. We’re seeing that in the crypto space right now.”

Long-Term Capital Management was a hedge fund that quickly collapsed in the late 1990s, rippling through the financial system due to Wall Street investment banks’ exposure to the fund. It was bailed out by the Federal Reserve.

Novogratz, CEO of Galaxy Digital, cited Celsius, a controversial cryptocurrency lending platform that suspended all withdrawals on Monday, as well as the collapse of the Terra project.

“It’s causing a lot of damage around the system. It’s causing deleveraging, which is accelerating,” Novogratz said.

The longtime crypto investor said he believes a bottom is likely near for bitcoin and other digital tokens. Bitcoin briefly fell below $21,000 on Tuesday, continuing to slide as investors sold risky assets.

“We went to the level that should be near the bottom. $21,000 bitcoin $1,000 ethereum. There was a lot of capitulation and fear,” Novogratz said. “It’s generally not a good sector to sell, but that doesn’t mean we can’t go lower. I think the macro environment is still quite challenging there.”

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

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