Crypto investing pioneer and former hedge fund manager Mike Novogratz has amassed billions of dollars by making bold bets on digital assets.
He has his crypto ecosystem company Galaxy Digital (BRPHF) into something similar to a crypto Berkshire Hathaway (if there was such an equivalent in crypto) by investing in promising blockchain projects and its recent records $ 1.2 billion acquisition of custody giant BitGo.
And much like the way stock investors turn to Berkshire’s Warren Buffett, Novogratz has established itself as a voice that crypto investors often look to after the next big call. “Well, I’m the oldest in crypto,” he joked in an exclusive interview with Yahoo Finance at the sold-out Bitcoin 2021 conference in Miami over the weekend.
In declaring the 30% sell-off, which hit Bitcoin in May to officially become the worst month for Bitcoin in a decade, Novogratz first picked what he believed drove the big start to the year: institutional buyers.
“Institutional money is extremely important. Let me give you some numbers – the total crypto market cap is bitcoin and everything else is about a trillion and a half trillion, ”he said. “That’s 30 basis points of total global assets – 30 basis points – nothing. So that it shifts to 2%, 3%, which I basically believe will be so, you need institutions. You own all the money. “
As Novogratz claims, many institutional players and hedge funds amassed around the $ 9,000 mark than hedge fund manager Paul Tudor Jones submitted his investment thesis for the first time in May 2020 and advocated the “digital gold” application of Bitcoin.
“It’s $ 60,000 a year later and the urge to ring the cash register is so ingrained that it happened,” he said. “So we see these kind of step function movements, and then we are going to have a long period of consolidation … and you are waiting for the new narrative that the next money wave brings, and I think we are thinking in one of those periods right now.”
One catalyst Novogratz lists as a possible narrative shift is the final approval of a Bitcoin ETF by the Securities and Exchange Commission (SEC). There are currently more than 10 applications pending, one of which is from Galaxy Digital itself. Novogratz previously told Yahoo Finance that he was thrilled to have Gary Gensler named SEC chairman and predicted that it would approve a Bitcoin ETF by the end of the year.
“America’s great wealth is 50 to 80 year olds, they usually work through RIAs, registered investment advisors. They buy in more slowly – this trend has started – the ETF just makes it easier, ”he said. “And so yes, if we had an ETF tomorrow, the price would go up.”
Elsewhere the explosion of opportunities to Earn returns on crypto assets like Bitcoin, either through centralized digital asset platforms like BlockFi (which Galaxy is invested in) or decentralized financial applications, also attracts capital that goes untapped in a low interest rate environment. BlockFi advertises 4.5% APY on Bitcoin, while other decentralized applications like THORChain offer a return of over 15%. As companies lending assets they borrowed, they could become SEC targets, Novogratz predicted, but he also shared a belief that Gensler’s understanding of crypto would lead him to act appropriately.
“I don’t think all regulations are terrible, I think we need good regulation. Gary Gensler is a smart guy. I trust that he will come out with smart regulation,” said Novogratz, adding that this to it could help attract more capital into the company the DeFi area (decentralized finance). “I actually think one of the big surprises for the next five years is how quickly DeFi is taking off.”
For traditional banks and credit institutions, of course, this could not bode well. As Jamie Dimon, CEO of JPMorgan, complained in his letter to shareholders earlier this year, non-bank competitors were able to act more agile without overcoming additional regulatory hurdles. If more of this is allowed to continue, the DeFi explosion is unlikely to subside. The total value of all DeFi protocols like THORChain has increased nearly 100 times from $ 16.5 billion in December to nearly $ 160 billion in May, according to DefiLlama figures.
“[Banks] will lobby like crazy – less against Bitcoin, more against DeFi – but Bitcoin is the Trojan horse to get it all in [to digital assets] So revolutions don’t happen without a little bloodshed, “said Novogratz.” Someone loses when someone wins.