Michael Novogratz, founder and CEO of Galaxy Digital, joins "Squawk Box" to discuss the selloff in cryptocurrency. Subscribe to CNBC PRO for access to investor and analyst insights on crypto and more: https://cnb.cx/2BT2E7y

Mike Novogratz, a major cryptocurrency investor, told CNBC on Wednesday that the breakdown in bitcoin won’t be fixed quickly.

The Galaxy Digital founder said on “Squawk Box” that bitcoin’s morning plunge feels like capitulation.

Novogratz also called it a “liquidation event,” as bitcoin overnight fell below $40,000 for the first time in 14 weeks and then dropped to below $31,000 at the morning’s low. That put it down more than 25% in the past 24 hours alone. That’s also a decline of more than 50% from last month’s all-time high near $65,000.

“Humpty Dumpty never gets put back together in two days ... when he cracks. It’s going to take a while. The market will consolidate. It will find a bottom somewhere. I’m hoping its close to here,” Novogratz said, suggesting it could be around $36,000 to $38,000.

Bitcoin repaired some of the damage later Wednesday, climbing back above $40,000 per token.

“The story hasn’t gone anywhere. This crypto revolution has happened, but these are certainly setbacks for the wallets and for the investor base. People lost a lot of money, so they’ll dust themselves off,” Novogratz added.

One factor that had been thought to be fueling bitcoin’s surge to its April all-time high was institutional adoption, including companies buying the cryptocurrency as an investment and some financial firms taking steps to provide clients exposure.

However, a recent note from JPMorgan said institutional investors have recently ditched bitcoin in favor of gold. Asked about those findings from JPMorgan, Novogratz remained optimistic on the long-term adoption picture.

“I see a movement. I was out with two bank CEOs in the last month” and both of them were fascinated with decentralized finance, he added. “I just see an inexorable move from financial institutions and tech companies into the crypto space.”

Novogratz had told CNBC on Tuesday he felt bitcoin was likely to consolidate into a training range between $40,000 and $55,000. And while that lower bound has already been breached, the former hedge fund manager said he saw $40,000 as an attractive entry point for buyers.

At Wednesday morning’s low, bitcoin was still up more than 215% in the past 12 months and around 6% higher year to date.

Novogratz said he believes several factors are behind bitcoin’s major backslide in recent weeks, including comments from Tesla CEO Elon Musk, who criticized the cryptocurrency’s environmental impact while announcing the electric-vehicle maker would stop accepting it as payment.

“A lot more people own crypto. Crypto has seeped into pockets all over our society and you had a confluence of events — a combination of tax day, Elon Musk tweets, whatnot, where you started breaking down the positivity in the price action, and now we’ve got a liquidation event,” Novogratz said.

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