Bitcoin, the leader of the cryptocurrency ecosystem, has been caught in the middle of a brutal sell-off that has pushed its price below $42,000. Bitcoin investors are wondering if there will be a new bottom.

Popular crypto investor and former Goldman Sachs executive Mike Novogratz has claimed that Bitcoin has a chance to drop below $40,000 and test a new low at $38,000 before gaining any upward momentum.

Speaking on CNBC's Squawk Box, Novogratz said that the bottom level that Bitcoin will test is the point where institutional investors can step in once again.

   "I know big institutions that are going through the process of placing their positions. Novogratz will see these as attractive levels to buy in. $38,000 on the charts, $40,000 looks like where we should be at the bottom."

Bitcoin has been following a steady downward trend over the past month. Since its all-time high of $69,000 in November, BTC price has corrected more than 40%. Such major corrections have always been part of Bitcoin's price volatility over the past decade.

Following Wednesday's Fed announcement, most crypto assets are heading down pretty quickly. The Fed's willingness to tighten monetary policy faster than expected has forced investors to seek safe havens.

   “We all, every investor out there, is thinking, 'Are we heading for a paradigm shift?' They will continue. So we are in this liquidity bubble."

US consumer inflation rose to 6.8% in 2021. Therefore, the Fed could possibly even take bold measures to keep this under control. However, Novogratz said there is no need to panic right now.

   “Crypto had a monstrous year last year. It's hard to imagine that you'll be going up into the sky without stopping. This is a retreat. We're seeing a tremendous amount of institutional demand on the edge. I am not nervous in the medium term”