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Michael Novogratz

Anjali Sundaram | CNBC

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

“We’re feeling a little 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 opening up, there were repercussions everywhere. We’re seeing this in the crypto space right now.”

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

Galaxy Digital CEO Novogratz cited a controversial cryptocurrency lending platform Celsius, which on Monday halted all withdrawals, as well as Fall of the Terra Project,

“It’s causing a lot of damage to the system. It’s speeding up deliveries,” Novogratz said.

The longtime crypto investor said that he believes there is a downside potential for bitcoin and other digital tokens. Bitcoin briefly fell below $21,000 on Tuesday as investors sold riskier assets, continuing its decline.

“We have moved to the level that should be close to the bottom. $21,000 bitcoin $1,000 ethereum. There has been tremendous dedication and fear,” Novogratz said. “Generally not a good area to sell, but that doesn’t mean we can’t go down. I think the macro environment is still pretty challenging.”

Bitcoin is down almost 70% from its all-time high in November 2021.



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