On Thursday (June 16), the day after Federal Reserve Chair Jerome Powell raised its policy interest rate by 0.75%, billionaire Mike Novogratz was asked to share his thoughts on the crypto market.
Former hedge fund manager Novogratz is the Founder and CEO of Galaxy Digital, “a technology-driven financial services and investment management firm that provides institutions and direct clients with a full suite of financial solutions spanning the digital assets ecosystem.”
Novogratz’s comments were made during an interview on Wednesday’s episode of Bloomberg TV’s “Bloomberg Markets: The Close“, where he talked to Sonali Basak, Caroline Hyde, Romaine Bostick, and Taylor Riggs
“You have to hold crypto in context of what’s gone on macro… there were going be headwinds this year because the Fed was going to have to withdraw liquidity, and so assets that went up based on cheap money forever — if they’re growth stocks, or expensive watches, or crypto — were certainly under pressure all year long.
“What’s exacerbated this move in crypto is a bunch of leveraged players that had far more leverage than I think people thought… And so you talk about Celsius or Three Arrows Capital… that’s caused almost something similar to what happened in 1998 with Long Term Capital Management… Alleged market neutral players with monster leverage that’s being unwound and that’s created a ton of fear in the space. And so you see lots of credit being withdrawn from the space, and when credits are withdrawn you’ve seen prices collapse…
“I look at the U.S. stock market. It looks like it’s got probably 4% more to go to 3500, which is where the 200-week moving average is, where support comes in, and I think you’re seeing this liquidation of risk and cryptos’s got caught up with it.“
“My guess is leverage has been knocked out of the system, but Humpty Dumpty doesn’t get put back together right away. It takes a while to kind of sort through. There’ll be bankruptcy proceedings in many companies, and so I think while we should bounce off of $20,000 [for $BTC] and bounce off of $1,000 [for $ETH], it’s gonna take a little while for crypto to regain narrative, regain confidence…
“I 100% think there are people on the sidelines waiting to build, but I think the first buyers from the traditional sense are going to be being global macro hedge funds. The moment the Fed flinches and says ‘we raised enough, we can’t do it anymore’, I think you’ll see lots of traditional macro funds who’ve had a great year buy Bitcoin. We’ll add to our position at that point…
“Guys who have done this for a long time realize the soft landing is impossible. And so, the economy is going to go to recession. It’s gonna go into a recession fast… You’re going to see the economy just screech to a halt. That’s what the Fed needs to do to get inflation down. And so, we’re going to go through this awkward period where growth is going to be rolling over and inflation is still going to stay stubborn before it rolls. When the Fed sees it rolling and they signal the pause, then you’ll see crypto take off. You’ll see other assets follow.“
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