On February 29, Mike Novogratz, the CEO of Galaxy Digital, shared his thoughts on the crypto market in an interview with Sonali Basak on Bloomberg Television.

Novogratz described the ongoing Bitcoin rally as a significant phase of “price discovery,” facilitated by the launch of spot Bitcoin exchange-traded funds (ETFs) in the U.S. These financial products have, according to Novogratz, attracted a “new army” of buyers and salespeople, contributing to Bitcoin’s remarkable 40% increase this year. He believes that with spot Bitcoin ETFs making it easier for a broader demographic to invest, including those who previously found the cryptocurrency market inaccessible, we are witnessing an unprecedented influx of capital and interest.

Echoing his earlier comments, Novogratz reiterated his expectation of potential corrections and consolidation in the near term. He suggested that Bitcoin might retract to the mid-$50,000s before surging to new highs. This anticipated correction is seen as a natural part of the market’s evolution, following its rapid ascent and the introduction of the recently-approved ETFs, which have significantly altered the market landscape.

A critical observation made by Novogratz concerns the current leverage within the cryptocurrency market. He pointed out that unlike the 2021 bull run, where institutional players held significant leverage, the current cycle sees retail traders overly leveraged, often through offshore crypto trading platforms. Novogratz cautioned that the market’s high leverage level is unsustainable, predicting a “washout” where some investors, particularly millennials and Gen-Z chasing highs, may face significant losses:

I think the market is too leveraged right now. It happens after huge runs,” he said. “There will be a washout. People can’t sustain this much leverage.

Looking ahead, Novogratz is optimistic about the approval of spot Ether ETFs by the SEC within the year. Galaxy Digital, in partnership with Invesco, is actively pursuing the opportunity to offer a spot Ethereum ETF, highlighting the growing institutional interest in cryptocurrencies beyond Bitcoin. The introduction of Ether ETFs would mark another milestone in the maturation of the cryptocurrency market, potentially unlocking new avenues for investors.

When discussing Galaxy Digital’s plans to get listed in the US, Novogratz touched on the regulatory challenges faced by the cryptocurrency industry. He noted the “unfriendly regime” towards cryptocurrencies in the past four years but expressed hope for change post-election. He said that Galaxy Digital’s efforts to list in the US signify the growing desire for cryptocurrency firms to integrate more deeply with traditional financial markets, despite regulatory hurdles.

On February 28, Brian Kelly, the CEO and founder of BKCM LLC, a firm specializing in digital currency investments, joined CNBC’s “Fast Money” to discuss Bitcoin’s price surge, which was nearing the $61,000 mark at the time. In a comprehensive dialogue with host Melissa Lee, Kelly offered his analysis of the current state of the cryptocurrency market and its potential future directions.

Kelly highlighted the critical role of timeframes in predicting Bitcoin’s path forward. He observed the digital currency’s struggle to surpass its previous peaks and mentioned a noticeable rise in funding rates, suggesting a potential short-term downturn. Kelly indicated that, based on Bitcoin’s volatile history, a retracement of 25% to 30% in the coming period wouldn’t be unexpected.

He stated:

Considering the short-term outlook, a pullback wouldn’t surprise me. I remind my team daily that even in the bullish phase of 2017, with Ethereum soaring by 4,000%, there was still a month it dipped by 50%. Bitcoin’s extreme volatility means a 25 or 30% decrease wouldn’t be shocking.

Despite foreseeing possible short-term fluctuations, Kelly maintains a positive long-term perspective on Bitcoin, citing its fundamental value and growing acceptance as catalysts for future peaks.

The discussion also ventured into the effects of a potential spot Ethereum (Ether) ETF approval on the cryptocurrency market. Kelly speculated that the anticipation surrounding a spot Ether ETF could inflate prices, mirroring Bitcoin’s experience. He further noted the rising interest in alternative cryptocurrencies, like Solana (SOL), which may see investment shifts following Bitcoin and Ethereum’s advancements.

Kelly shed light on certain stocks that could gain from the ongoing cryptocurrency momentum, such as mining companies and service providers like Coinbase (NASDAQ: COIN). Despite acknowledging the mining sector’s high capital demands, he underscored the lucrative opportunities it presents in bull markets. He identified Coinbase as a key beneficiary of the surge in cryptocurrency investments, given its significant position in the exchange market.

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