Crypto investor Michael Novogratz is drawing parallels between crypto and Long Term Capital Management, a highly leveraged hedge fund that blew up in the late 1990s.
"We are going through what feels to me a little bit like a Long Term Capital Management moment in crypto," Novogratz said on CNBC's "Squawk Box." "It was the big hedge fund with all the leverage, and when it started unwinding, there was repercussions everywhere. We are seeing that in the crypto space right now."
Long-Term Capital Management was a hedge fund that rapidly collapsed in the late 1990s, rippling through the financial system because of Wall Street investment banks' exposure to the fund. It was bailed out by the Federal Reserve.
Novogratz, CEO of Galaxy Digital, cited Celsius, a controversial cryptocurrency lending platform that paused all withdrawals on Monday, as well as the collapse of the Terra project.
"That's causing a lot of damage around the system. That's causing deleveraging that's accelerated," Novogratz said.
The longtime crypto investor said he believes a bottom is likely near for bitcoin and other digital tokens. Bitcoin briefly dropped below $21,000 on Tuesday, continuing its plunge as investors sold off risk assets.
"We've gone to the level that should be close to a bottom. $21,000 bitcoin $1,000 ethereum. There's been a tremendous amount of capitulation and fear," Novogratz said. "Usually not a good area to sell, but it doesn't mean we can't go lower. I think the macro environment is still pretty challenging out there."
Bitcoin has fallen nearly 70% from its all-time high in November 2021.