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Mike Novogratz Predicting a Recession – But Bottom is Close for Cryptocurrency

Mike Novogratz
Mike Novogratz

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Though many analysts predict a recession in 2023, Wall Street veteran and Bitcoin bull Mike Novogratz just issued one of the most pessimistic forecasts yet.

“The market is going to crumble,” Novogratz told MarketWatch on Wednesday, adding, “We are starting to collapse into an extremely quick recession, and you can even see it in several different ways.”

Novogratz, the CEO of cryptocurrency merchant bank Galaxy Digital, delivered the interview soon before the Federal Reserve raised interest rates by 0.75 percentage points, the steepest spike since 1994. The rate increase came merely five days after the US consumer price index unexpectedly jumped to a 40-year high of 8.6% in May.

According to Novogratz, the housing market, which is finally cooling after a two-year high, and rising inventories are signs of an impending recession. 

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Novogratz predicted in the interview that the central bank will hike rates by 75 basis points, causing the stock market to rise. The Dow Jones Industrial Average, S&P 500 and the NASDAQ gained 1%, 1.5% and 2.5% respectively, following the rate raise announcement from Fed Chair Jerome Powell.

Novogratz also forecasted a stock selloff in the upcoming period, which came true exactly on time. S&P 500 futures were 2.2 percent lower at 8 a.m. ET, wiping away yesterday’s gains and plummeting the benchmark further into bear territory.

“They’re climbing right into a bubble popping,” Novogratz explained.

A Recession is On The Horizon

A recent survey concluded that there will be a recession in 2023. The experts cited a significant reduction in economic activity over the course of two quarters as the reason for the recession. 

A recent survey conducted by the Financial Times and the University of Chicago’s Policy Research Center Initiative on Global Markets suggested that US macroeconomics experts agree with a recession. A survey of 49 US macroeconomics experts revealed the majority opinion that it is likely this time will happen in 2023.

Approximately 70% of macroeconomists surveyed predict the NBER will make this decision in 2023, with 38% expecting a recession to begin in the first two quarters and another 30% expecting it to begin in the second half.

The Fed continues to be helpless to control surging inflation, which is being fueled even more by skyrocketing fuel and food prices resulting from Russia’s war in Ukraine.

Powell hinted at another substantial rate hike at the July FOMC meeting, saying it would be in the 50- to the 75-basis-point range, given the Fed’s expectations for weaker economic growth and greater unemployment.

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Is Crypto Approaching Its Bottom Close?

Layoffs are starting to accumulate, and the Fed is in a financial bind,” Novogratz said, “and will be obliged to raise rates until inflation cools.” This has had an impact on the crypto world though too.

Despite an 8.6% YoY increase in May’s CPI figures for the United States, the major cryptocurrencies began to reverse. As a result, a slew of crypto exchanges have begun laying off employees. BlockFi slashed 20% of its workforce, while prominent exchange Coinbase laid off over 1,000 personnel.

Mike Novogratz also equated last week’s crypto slump to a capital management fund collapse in 1998.

In the long haul, though, Novogratz is confident about cryptocurrencies including Bitcoin. “You’re going to see Bitcoin explode north the moment the Fed flinches, the moment Powell pauses because the economy is starting to roll over,” Novogratz warned.

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Bitcoin is expected to bottom at $20,00, while Ethereum is expected to bottom at $1,000, according to Novogratz. At the time of writing, the two most valuable crypto assets were valued at $20,630 and $1,080, respectively.

Investors interested in investing in ETH and BTC must undertake their extensive analysis and research when making decisions.

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