Mike Novogratz compared this bitcoin crash to late 2017, when the market plunged into a 'winter' lasting years

• Crypto billionaire Mike Novogratz compared the current state of the crypto market to late 2017.
• At the time, bitcoin plunged into a "winter" lasting years as buyers lost interest following a rally.
• Novogratz said the proliferation of other coins was overwhelming the crypto market.

Leading crypto investor Mike Novogratz has compared bitcoin's dramatic price crash to late 2017, when a boom in interest in digital tokens presaged a market collapse into a "winter" that lasted years.

Novogratz said that the widespread creation and adoption of alternative cryptocurrencies was overwhelming the market and meaning investors' cash was spread too thin. Investors have recently pumped up bitcoin alternatives like ether, XRP and dogecoin, and turned to new creations like safemoon.

"The proliferation of cryptos is a supply response that overwhelms demand," he wrote on Twitter. "Same happened in 2017."

Novogratz said he was confident that "the best projects with utility and community will survive and thrive," just as bitcoin eventually skyrocketed again in late 2020.

Novogratz is not the first to make the comparison between the current state of the bitcoin market and the situation in late 2017, when a sharp rally to record highs was followed by a collapse in prices.

On Wednesday, bitcoin crashed as much as 30% to $30,000 before rebounding to around $40,000, more than 38% off its April all-time high of close to $65,000.

The drop was triggered by China signalling it would crack down on the use of cryptocurrencies for payments, but the multi-day slide began last week when Elon Musk said Tesla would stop accepting bitcoin as payment for cars due to the network's huge energy use.

It started a debate in the crypto community about whether this was the start of another bitcoin "winter" - a period in which the price drops sharply and stays low for years.

The last such winter began at the end of 2017, when bitcoin slid from a high of around $20,000 to a low of below $4,000 at the start of 2019.

Novogratz was replying to a tweet from Guggenheim chief investment officer Scott Minerd, who said the crypto market looks like the Tulipmania bubble of 17th-century Netherlands.

"As prices rise, tulip bulbs and #crypto currencies multiply until supply swamps demand," he said.

Pankaj Balani, chief executive of crypto derivatives exchange Delta, told Insider he also saw parallels with 2017 and the rise of bitcoin alternatives.

He said money has been "rotating" into coins such as ether, XRP, and dogecoin, which is a "typical sign of retail exuberance."

Bitcoin's dominant share of the crypto market has been waning steadily since the start of the year, when it accounted for around 70% of total market capitalization. That share has now fallen to just over 40%, based on data from Coinmarketcap.com. This is around its lowest in two years.

But Balani said the money has been coming from investors chasing quick gains and is not "sticky capital" that will stay in the market when prices start to fall.

Analysts have also compared the $100 billion listing of crypto exchange Coinbase in April to the listing of bitcoin derivatives by CME Group in late 2017, which came just before prices plunged sharply.