Bitcoin may be near a bottom at $20,000 as the crypto market endures a 'Long Term Capital Management moment', says Mike Novogratz

• Bitcoin is getting closer to the bottom of a sell-off at $20,000, billionaire investor Mike Novogratz told CNBC on Tuesday.
• The Galaxy Digital CEO said the crypto world is undergoing a "Long-Term Capital Management moment".

Bitcoin's sharp sell-off may be nearing a bottom, with potential respite arriving as the cryptocurrency space is experiencing a rippling reminiscent of Long-Term Capital Management two decades ago, billionaire investor and bitcoin bull Mike Novogratz told CNBC on Tuesday.

"[We're] going through what feels to be a little bit like a Long Term Capital Management moment in crypto," said the founder and CEO of investment management firm Galaxy Digital in an interview.

LTCM nearly collapsed in 1998 and was set to expose Wall Street's biggest banksto more than $1 trillion in default risks. The highly leveraged firm received a $3.6 billion bailout organized by the Federal Reserve, with the central bank gathering 14 banks and brokerage firms to invest in the company to prevent a blowup from triggering a potential global financial crisis.

["When] it started unwinding, there was repercussions everywhere. And you know, we're seeing that in the crypto space right now with both Celsius," and the Terra Luna ecosystem imploding, he said.

Crypto lender Celsius Network over the weekend froze withdrawals, swaps and transfers between accounts after crypto prices sank, with bitcoin losing more than 20%. In May, the TerraUSD algorithmic stablecoin lost its US dollar currency peg that extended to its sister token Luna. TerraUSD's collapse prompted the company behind it to split its blockchain into two new parts that would issue new native tokens.

"That's causing a lot of damage around the system. That's causing deleveraging that's accelerated," Novogratz said.

The crypto market has now dropped below $1 trillion in value for the first time since early 2021. Bitcoin has fallen more than 50% this year. On Tuesday, it declined 2.5% to $22,651.

"We've gotten to levels that I think should be close to the bottom - $20,000 bitcoin, $1,000 ethereum," he said. "There's been a tremendous amount of capitulation and fear and so usually not a good area to sell. It doesn't mean we can't go lower. I think the macro environment is still pretty challenging out here. But there's been a lot of damage done."

Other so-called risk assets such as stocks have been hit hard as the Federal Reserve quickly raises interest rates to tame hot inflation. The S&P 500 on Monday closed inside a bear market. Investors were now considering the Fed may hike interest rates by 75 basis points on Wednesday after last week's scorching inflation reading of 8.6% for May.

"Bitcoin will lead the markets back out of this Fed tightening. The moment the Fed flinches, the moment [Fed Chair Jerome] Powell pauses because the economy is really starting to roll over, you're going to see bitcoin explode north," said Novogratz. "As long as the Fed is hawkish, it's hard for any risk asset to do really well."