If you’re a relatively new cryptocurrency investor, this past week has introduced you to the incredible rallies and nauseating selloffs inherent with digital coins.
Late last week, Tesla (NASDAQ: TSLA) CEO Elon Musk announced that the electric carmaker would cease accepting Bitcoin out of concern of “rapidly increasing use of fossil fuels for Bitcoin mining and transactions.” The announcement pushed the world’s largest crypto below $50,000 for the first time since March.
Cut to Tuesday and the People’s Bank of China released a statement reiterating that digital tokens cannot be used as a form of payment, an announcement that pushed Bitcoin down 30% on Wednesday to as low as $30,201.96. That afternoon, the coin surged 33%.
Thursday saw a rebound in the crypto market. As of this writing, Bitcoin is up more than 13% to $41,710.57.
But even with today’s bounce higher, long-time crypto bull Mike Novogratz says the breakdown in Bitcoin this week won’t be fixed quickly.
Novogratz said Wednesday’s plunge in Bitcoin felt like capitulation and called it a “liquidation event.” And such a move won’t be recovered immediately.
“Humpty Dumpty never gets put back together in two days… when he cracks,” Novogratz, the founder of Galaxy Digital, said. “It’s going to take a while. The market will consolidate.”
Even as Bitcoin has recovered, Novogratz says, “The story hasn’t gone anywhere. This crypto revolution has happened, but these are certainly setbacks… for the investor base. People lost a lot of money, so they’ll dust themselves off.”
“I think we are going to consolidate for a while, four to six weeks,” he said, adding that a $40,000 to $50,000 price range would be fair.
Bitcoin hit a high of nearly $65,000 in early February after Musk announced that Tesla would accept bitcoin as payment and would be investing $1.5 billion in the digital coin.
Since then, it has been driven lower, and Novogratz sees multiple factors behind the downslide, including Musk’s about-face on accepting Bitcoin last week due to its environmental impact. But with more investors not involved with cryptos, Bitcoin’s wild swings this week matter more than they used to.
“A lot more people own crypto,” Novogratz said. “Crypto has seeped into pockets all over our society and you had a confluence of events—a combination of tax day, Elon Musk tweets, whatnot—where you started breaking down the positivity in the price action, and now we’ve got a liquidation event.”