In a recent Bloomberg television interviewMichael Novogratz, founder and CEO of Galaxy Digital, predicted that the flagship cryptocurrency could experience a temporary decline before reaching new heights.
In a recent Bloomberg television interviewMichael Novogratz, founder and CEO of Galaxy Digital, predicted that the flagship cryptocurrency could experience a temporary decline before reaching new heights.
Novogratz, an experienced investor in the cryptocurrency space, believes Bitcoin could retreat back to the mid-$50,000 range amid a broader consolidation phase following its impressive rally that saw an increase of over 40% this year. .
As Guru-Investingreported, the rally was largely driven by the successful launch of Bitcoin exchange-traded funds (ETFs).
The digital currency was trading at around $60,700 at the time of the interview, riding the wave of its recent gains.
The consolidation phase
Novogratz described the current market momentum as a “price discovery” phase that was driven by the introduction of Bitcoin ETFs, which have attracted a new wave of investors to the cryptocurrency sector. This influx of buyers has contributed significantly to the rise in the price of Bitcoin.
However, Novogratz warned that current levels of market leverage, particularly among millennials and Gen Z investors who are “chasing highs,” indicate that a correction could be imminent.
“There are a lot of millennials and Gen Z doing YOLO, and they will all receive some of that money and a lot of them will be eliminated,” he explained.
He noted that some investors could benefit from the situation, but many could face significant losses if the market suffered a slowdown.
Leverage and marked dynamics
Digging deeper into the market dynamics, Novogratz pointed out the leverage difference between the 2021 bull run and the current situation.
He noted that large institutional players are now less leveraged, while retail traders are overleveraged, especially through offshore crypto trading platforms that offer substantial leverage. “The big institutional players have less leverage right now… but retail still loves leverage,” she said.
This scenario, according to Novogratz, sets the stage for potential “crashes,” in which the market could experience a significant pullback before stabilizing and resuming its upward trajectory.
The cryptocurrency mogul warned of the volatility such leverage can introduce to the market, stating: “We will see this boom and bust in the short term with a really positive overall trend as people continue to decide to allocate some of their portfolios.” to Bitcoin.”
