Billionaire Mike Novogratz says the crypto industry is suffering from a credit crisis - and that he was 'darn wrong' on leverage risks

"After a series of bankruptcies, I underestimated the amount of borrowed money that was in the industry," said the billionaire investor.

"I was wrong because I didn't know how much leverage there was in the system," the CEO of investment company said at the summit.

He said that people didn't expect the magnitude of losses to show up in professional institutions' balance sheets.

He said that it turned into a full credit crisis with huge damage to confidence in the space.

Celsius Network and Three Arrows Capital have both filed for Chapter 11. Genesis faces hundreds of millions of dollars in losses due to its exposure to 3AC.

Companies took massive leverage, which meant they had short-term deposits and they lent them out. People go bankrupt in two different ways.

The second this year, when the market for cryptocurrencies fell 70% from its November all-time high, was a time when several companies were struggling to raise funds. Analysts see the slump as a way to get rid of companies with a less solid business footing.

There isn't enough regulation in the industry.

He said that the SEC didn't do a lot to protect the retail investors.

While it has recovered somewhat from recent lows, it is still down 50% year-to-date and has lost $430 billion. The Federal Reserve is tackling red-hot inflation by hiking interest rates.

Despite the industry's troubles, he believes that the token will eventually reach $500,000. At last check, it was worth $23,623.

According to the chief strategist at one of the world's biggest brokers, investors should back the truck up and use the opportunity to buy cheap stocks.