Mike Novogratz Says Bitcoin Market Was Too Excited Before Last Crash – And Says Highly Leverage Retail Traders | Currency News | Financial and business news

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Lucas Jackson / Reuters

Crypto billionaire Mike Novogratz said Tuesday’s bitcoin crash came after the market got too excited. He said retail investors using large amounts of leverage were a key factor in the sharp decline. Bitcoin fell 17% on Tuesday as cryptocurrency became legal tender in El Salvador. See more stories on the Insider business page.

Crypto billionaire Mike Novogratz said bitcoin’s latest crash was the result of investors overly excited about recent developments in the crypto space, and said excess leverage has fueled volatility.

Bitcoin fell 17% on Tuesday after El Salvador’s cryptocurrency rollout, as legal tender was affected by problems. It was about 1% lower at $ 46,420 on Wednesday, down from $ 52,000 earlier on Tuesday.

“I think we got too excited and it was a little bit of air coming out of the balloon,” Novogratz said in an interview with Bloomberg TV on Tuesday. “The deal has gotten too long.”

Novogratz, who heads crypto investment firm Galaxy Digital and is an influential figure in the space, said large amounts of leverage in the system contributed to the steep falls.

“There is a lot of retail money, a lot of it is leveraged,” he said. “There have been roughly $ 4 billion in liquidations that have occurred over a short period of time. They are mostly operated overseas in places like FTX and Binance.”

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Exchanges such as Binance, Bybit, and Huobi allow users to borrow large sums to trade. Analysts have said in recent weeks that traders have used this leverage to “go long” – that is, bet the price will rise – on bitcoin and other cryptos.

When cryptocurrency prices fall, traders who have used leverage for a long time often sell their positions, or the stock exchange automatically liquidates them to limit losses. This often drives prices down further, triggering more liquidations in a cascading effect.

Novogratz told Bloomberg he believes the market has become excited with good reason. He said that Visa buying a non-fungible token for $ 150,000 and Amazon posting a crypto job posting made many people think the technology is here to stay.

He said he was confident El Salvador would be successful in its bitcoin deployment, saying the token could be used to send remittances.

“Every time you launch a new technology, there are problems,” he said. “Come back in six weeks or 12 weeks and let’s talk about how it works.”

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