Mike Novogratz warns about Bitcoin air-pockets becoming frequent in a backdrop of unprecedented monetary easing by the major central banks and four revolution technologies where fewer winners take it all. 

Crypto billionaire Mike Novogratz said that the correction in the price of Bitcoin, during the first week of September came after the market got too excited. 

“Crypto billionaire Mike Novogratz said that the correction in the price of Bitcoin, during the first week of September came after the market got too excited”

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While the Perma Bitcoin bull remains ultra-bullish about the largest cryptocurrency by market capitalization, Mike Novogratz cited Bitcoin’s recent drop from 50,000 USD as “air being popped out of the balloon,” he said. 

Bitcoin’s adoption and acceptance in world financial markets continue to grow, and El Salvador now accepting Bitcoin as legal tender is just the beginning, with other countries soon to follow. Moreover, the top cryptocurrencies are now being used as collateral to secure loans. 

We believe the writing is on the wall. Cryptocurrencies will be the future of finance. So, in the words, of billionaire investor Carl Icahn, cryptocurrencies are here to stay. 

Mike Novogratz warns about Bitcoin air-pockets, we can best explain this view by using the casino analogy

So, the numbers on the roulette table represent investment opportunities. But fourth revolution technologies are spurring a consolidation, which means that there are now fewer numbers, potential investments, for investors to pile their chips on. Meanwhile, the House (central banks) is jollying investors, or gamblers, with more chips to play on a smaller roulette table with fewer numbers. 

“we can best explain this view by using the casino analogy”

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We believe the above analogy could explain the FANG effect on the stock market, with FANG stocks up 400% in 2020.

Mike Novogratz warns about Bitcoin’s air-pockets could be interpreted as a red flag for investors using excessive leverage 

“Retail investors using large amounts of leverage were a key factor in the sharp drawdown,” said Mike Novogratz.

But that is not the real reason for the sharp drawdown. Think about it. Retailers using leverage, in theory, should drive prices higher, bearing in mind price trajectory is upwards. 

“There’s lots of retail money, a lot of it’s leveraged” – Mike Novogratz

A few people, maybe a thousand, known as whales, own 40% of Bitcoin tokens. 

Put simply, Bitcoin’s price is determined by what the whales, the cartel, and if the whales, better-called sharks, decide that there are enough retailers to make a meal, these predators will bet the other way and feast on the retailers. Investing, or trading is a zero-sum game one investor’s profit is another one’s loss. 

So, if the cartel has information, which they always do, bearing in mind exchanges sell this information, that retails are long on leverage, the cartel will sell, thereby forcing prices down. So, margin calls will be triggered, which will force retailers to sell. That will lead to sharp drawdowns. Whales then swim the other way and scoop it all up at discount prices. 

The cryptocurrency market, now worth two trillion USD, and like any other market, a few big players control the price. In this current market, the central banks set the price of every asset. 

“There’s lots of retail money, a lot of it’s leveraged,” he said. “There was about $4 billion of liquidations that happened in a short period of time… That’s mostly leveraged offshore in places like FTX and Binance,” said Mike Novogratz.