FOLLOW US

Bitcoin's dramatic sell-off may be coming to an end, with a potential rest as the cryptocurrency space is experiencing a rippling reminiscent of Long-Term Capital Management two decades ago, billionaire investor and bitcoin bull Mike Novogratz told CNBC on Tuesday. 

"[We're] going through what feels to be a little bit like a Long Term Capital Management moment in crypto," said the founder and CEO of investment management firm Galaxy Digital in an interview. 

LTCM nearly collapsed in 1998 and was set to expose Wall Street's largest banks to more than $1 trillion in default risks. 

["When] it started unwinding, there was repercussions everywhere. And you know, we're seeing that in the crypto space right now with both Celsius," and the Terra Luna ecosystem imploding, he said. 

Crypto lender Celsius Network over the weekend halted withdrawals for clients, as well as swaps and transfers between accounts after crypto prices crashed, with bitcoin shedding over 20% from its value. In May, the TerraUSD algorithmic stablecoin lost its US dollar currency peg that extended to its sister token Luna. 

"That's causing a lot of damage around the system. That's causing deleveraging that's accelerated," Novogratz said. 

The crypto market has witnessed $1 trillion wiped off from its total value for the first time since early 2021. Bitcoin plunged more than 50% this year. On Tuesday, it declined 2.5% to $22,651. 

"We've gotten to levels that I think should be close to the bottom - $20,000 bitcoin, $1,000 ethereum," he said. "There's been a tremendous amount of capitulation and fear and so usually not a good area to sell. It doesn't mean we can't go lower. I think the macro environment is still pretty challenging out there. But there's been a lot of damage done." 

Other risk assets such as stocks have been hit hard as the Federal Reserve hiked interest rates to curb the increasing inflation. The S&P 500 on Monday closed inside a bear market. Investors were now considering the Fed may hike interest rates by 75 basis points on Wednesday after last week's scorching inflation reading of 8.6% for May. 

"Bitcoin will lead the markets back out of this Fed tightening. The moment the Fed flinches, the moment [Fed Chair Jerome] Powell pauses because the economy is really starting to roll over, you're going to see bitcoin explode north," said Novogratz. "As long as the Fed is hawkish, it's hard for any risk asset to do really well."