The Opacity of Centralized Organizations is Causing Market Volatility

Novogratz cited the opacity as the reason for the rising market volatility following the failure of those centralized organizations.

In an interview with CNBC, Galaxy Digital CEO Mike Novogratz shared his latest prediction on the state of the crypto market after massive leveraged positions were liquidated, stating that it is close to the bottom. Until a bullish narrative reverses the overall sentiment, choppy trading may persist in the short term.

“$13K Bitcoin?”

When asked if Bitcoin could fall to the $13k level, a former hedge fund manager said "no" to such a possibility. He thinks that most of the deleveraging has been done after the liquidation hit Celsius, 3AC, BlockFi, and others with “an unbelievable amount of leverage.”

Despite the influx of new capital that was used to purchase the bankrupt companies, he said, the market could drop further. In such a scenario, he forecast that it could go sideways as it waits for a sign of reversal.

“Can we go lower? Of course we could. It feels that we’re 90% through that deleveraging. The problem is for you to go much higher, you need the narrative to go much higher and you need new capital to come in.”

The following is a summary of the issues that have been raised about the project.

Novogratz said that centralized entities taking custody of clients’ assets during market downturns is a big problem, since they lack transparency. He noted that following such an event, regulatory authorities will hold accountable the failing companies.

“Look at Celsius for example, no one knew how much leverage they had. When all is said and done there will be accusations and prosecutions for fraud. There will be gross misconduct in some of these cases.”

He praised decentralized lending platforms, Aave and Compound, for being transparent about financial information. This led to their excellent performance in spite of the extreme volatility that prevailed in the market. Novogratz described CeFi players as "building on top of crypto" who are responsible for the violent market crash because their behavior contradicted what cryptocurrency was initially designed for.

Gary Gensler is a former chairman of the Commodity Futures Trading Commission (CFTC).

Novogratz also gave some thoughts on the SEC, once again rejecting Grayscale's proposal to convert its futures-based ETF to a spot ETF.

The billionaire said that the SEC boss, Gary Gensler, had disappointed the crypto community as people generally expected him to be a positive force at the beginning of his term. The billionaire attributed Gensler's hawkish stance against crypto partly to the scale of the recent selloff, which motivated him to remain cautious and even worried about the space.