Mike Novogratz is a billionaire hedge fund manager who dubbed himself the “Forrest Gump of Bitcoin.” He believes the recent crash in the cryptocurrency sector is a complete financial crisis. He also admitted that the size of the system’s leverage was much greater than he previously thought.
At the Bloomberg Crypto Conference on Tuesday, Novogratz stated that he did not anticipate the scale of losses that would appear in professional institutions’ balance sheets. This triggered the chain of events. He also claimed that it had become a full-fledged credit crisis in addition to complete liquidation and severe damage to trust.
Terraform Labs, the firm that developed Terra and Luna, was a major proponent of Galaxy Digital Holdings Ltd. Novogratz suggests that both the industry and retail investors had very little idea of risk management after the collapse of the stablecoin.
Since its peak last year, bitcoin has fallen. Investors are fleeing a rout that coincided with a slumping stock market and has been exacerbated by implosions throughout the sector. It’s trading in a $19,000 to $22,000 range.
In May, TerraUSD (UST) lost its dollar peg, and nearly all of its worth evaporated with the introduction of its digital currency equivalent Luna. With Babel and Celsius, as well as hedge fund Three Arrows Capital, dragging down the industry, it sparked what is called a “crypto winter.”
Novogratz claimed that regulators were to blame for allowing businesses to borrow massive debt. He claims this happened because they did not do enough to safeguard consumers. The Lehman Brothers bankruptcy during the financial crisis, he said, was comparable to the crypto market. He also called for more openness and disclosures in the sector.
Novogratz also said that the crypto industry had reached its lowest point. He added that Bitcoin’s case for itself is still sound. In the meantime, central banks around the globe are trying to combat inflation.
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