Is the bottom in? Raoul Pal, Scaramucci load up, Novogratz and Hayes weigh in
Some high-profile investors have taken the recent market downturn as an opportunity to add to their crypto positions, though others warn there’s still a risk of worse to come.
Some of the highest-profile investors in crypto believe that a crypto market bottom is fast approaching and the timing is right to buy — although one still warns of catastrophic outcomes should prices fall below established support levels.
Billionaire Mike Novogratz, founder, chairman and CEO of digital asset merchant bank Galaxy Digital Holdings, told a Morgan Stanley conference on Monday that cryptocurrencies may be close to a bottom, with Ether (ETH) likely to hold at $1,000 and Bitcoin (BTC) at around $20,000 to $21,000.
The bottom for crypto would be realized faster than that of United States stocks, which could fall a further 15% to 20%, he said:
“Ethereum should hold around $1,000 and it’s $1,200 right now. Bitcoin is around $20,000, $21,000 and it is $23,000, so you are much closer to the bottom in crypto than you are where I think, stocks, are going to have another 15% to 20% decline.”
Hayes warns of sell-off risk
Arthur Hayes, co-founder and former chief of BitMEX, took a similar view, acknowledging on Twitter on Monday that on-chain data for wrapped Bitcoin (wBTC) and Ether indicated that “liquidations have mostly happened.”
However, Hayes warned that should support levels break for BTC and ETH at $20,000 and $1,000, respectively, we could expect “massive sell pressure in spot markets.”
Pal, Scaramucci loading up
Macro investor Raoul Pal is taking the recent market downturn as an opportunity to add to his crypto positions. On Tuesday, Pal told his 956,000 Twitter followers that “we are in a buy zone” for Bitcoin, adding he was getting ready to “significantly” add to his crypto positions “probably starting next week and into July.”
The former Goldman Sachs executive explained that the imminent Bitcoin bottom can also be signaled by the weekly Relative Strength Index (RSI), which is at 31, edging closer to its lowest ever at 28.
RSI is a metric used by investors to measure the speed and magnitude of price changes, which can indicate overbought or oversold conditions. According to Investopedia, an RSI reading of 30 or below indicates an oversold and undervalued condition.
Pal said his framework frequently expects 60% drawdowns over the long-term time horizons, adding:
“In fact, the best way to optimize returns is to add significantly when the market tests the key trend.”Anthony Scaramucci, founder of Skybridge Capital, told CNBC’s Squawk Box on Monday that investors should “stay disciplined” amid the crypto slump, noting that his fund has continued adding Bitcoin and Ether into its portfolio.
“With incremental cash coming into our fund we have bought more Bitcoin and Ethereum […] So yes, truth be told, people will look back on this debacle and say I wish I had fresh cash to buy into that.”
Novogratz was less gung-ho about investing right now, taking a more conservative approach and telling attendees that it may not yet be time to “deploy lots of capital,” as the economy may have further to fall.
“Until I see the Fed flinch, until I really think, OK the economy is so bad, and the Fed is going to have to stop hiking and even think about cutting, I don’t think it is time to really deploy lots of capital.”
Other metrics that could shed light on whether crypto is nearing its market bottom is the Fear and Greed Index, which as of June 15, is currently sitting at eight, under “Extreme Fear,” which was last seen on May 17, around the time of Terra’s collapse.