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- Mike Novogratz has stated in Anthony Pompliano’s latest podcast that the recent Bitcoin crash was caused by the mass liquidations on the margin exchanges.
- According to Novogratz, the biggest mistake in Bitcoin trading is that many investors re-enter too early in the event of a crash.
Michael Novogratz, CEO of the crypto investment company Galaxy Digital, was asked in the latest episode of Anthony Pompliano’s “Pomp Podcast” about the current situation of the crypto market and the biggest mistakes in trading he could observe among investors. The Bitcoin bull compared the current situation on the cryptocurrency market to a class 7 hurricanes.
According to Novogratz, such events are very rare. The current situation, in which entire countries and economic sectors are closed, is unique, according to Novogratz. Although Novogratz was one of the biggest advocates of the theory of Bitcoin as digital gold, he admitted that Bitcoin is currently still largely held by individual investors and in addition is a high-risk leveraged financial instrument that is traded with substantial margins on BitMEX, Binance and other exchanges.
According to Novogratz, it is therefore not surprising that the crash occurred. According to Novogratz, the numerous liquidations on the margin exchanges triggered a “fastball effect” that could not be stopped. Already last Friday Novogratz joined the debate about the reasons for the crash and explained that “panic selling in the market, not institutional sales” were responsible.
Contrary to the opinion of a number of analysts that the sell-off was mainly caused by the sale of institutions responding to current developments in the coronavirus epidemic, Novogratz commented via Twitter:
That wasn’t institutions. That was a leveraged washout. Institutions aren’t fast enough to sell like that. That wa panic selling from people who bought on margin.
The biggest mistake Bitcoin traders make
Regarding the biggest mistakes Bitcoin investors can make at this stage, Novogratz said that many investors are returning too early. According to Novogratz, things are always getting worse than initially expected:
The biggest mistake that people make is that, when a market breaks, everyone thinks it’s time to get back in way too early. Shit always gets worse than you think it’s going to. I sometimes make the mistake, but I tell myself ‘Hey, when you want to buy something, go on a long walk, then come back a week later and look at it,’ and it’s usually worse off.
To find the right time for an investment, Novogratz said that confidence is very important. As soon as this begins to return, there might be a good opportunity to invest:
So I think that [cryptocurrencies]are probably better investment opportunities than stocks. […] Speculative markets need a story, they need confidence. […] Bitcoin is a confidence game and gold is a confidence game right now. And we are in the middle of the biggest global ‘kick in the gut’ story I have ever seen. Confidence is shaken, the institutions are shaken.
Ultimately, according to Novogratz, it is also a matter of finding the assets that have suffered particularly heavily and that will be held over a longer period of time.
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