Bear or bull market? Crypto experts weigh in on recent volatility

The price of Bitcoin and many cryptocurrencies may have seen double-digit percentage drops over the past 24 hours, but some crypto experts still appear cautiously optimistic about the market as a whole.

In an interview with CNBC's Squawk Box on Wednesday, Galaxy Digital founder Mike Novogratz said that the cryptocurrency market "will take a while" to consolidate and find a bottom as the price of Bitcoin fell to $30,000 earlier in the day. When Novogratz made his comments, the price of the crypto asset was around $38,000, and Bitcoin closed above $42,000 yesterday.

“A bunch of events came together: Tax Day, Elon Musk tweeting, etc., and we started to weaken the positive factors in the price action, and now we have a liquidation event. It’s not going to rebound immediately, it’s going to consolidate for a while,” Novogratz said.

Commenting on Bitcoin, Novogratz said: “We feel like capitulation this morning. There was a combination of events, tax day, Elon Musk’s tweets, etc., and we started to soften the positives in the price movement… It’s not going to bounce back anytime soon.

— squawkbox (@SquawkCNBC) May 19, 2021

Although Galaxy Digital CEO estimated that Bitcoin could bottom out at $36,000 or $38,000, the price rebounded slightly to $42,434 before falling back below $40,000. At press time, Bitcoin is trading around $36,000.

There could be a number of factors at play regarding the recent cryptocurrency market volatility. Cryptocurrency prime broker Genesis Global Trading reported a Bitcoin-driven sell-off overnight due to forced liquidations and leveraged position unwinding.

At the same time, the firm said that when the price of Ethereum fell below $2,000 for the first time since early April, many Ethereum cash buyers entered the market, and when the price of Bitcoin reached $35,000, macro funds began buying Bitcoin.

“While initial volume on this morning’s rally off the lows was light, we are seeing stabilization in the market and greater alignment among institutional investors,” Genesis said.

Others in the cryptocurrency space — including Konstantin Boyko-Romanovsky, CEO and founder of validator node hosting platform Allnodes, and Steve Ehrlich, CEO and co-founder of Voyager Digital — said the recent price drop could be due to people moving their investments following reports of China allegedly banning cryptocurrency exchanges, services and trading. Three Chinese associations recently outlined issues related to cryptocurrency investments and warned people about market risks.

Boyko-Romanovsky said: “The correction in the cryptocurrency market is a general phenomenon. However, this does not mean that a bear market is coming. The latter would be the case if there were signs of a slowdown in the blockchain industry. This could not be further from the truth.”

Ehrlich added: “What we are seeing is a correction, but it is an opportunity for retail participants to rebuild themselves and increase their market positions. Cryptocurrencies are not going away.”