Mike Novogratz, founder and CEO of Galaxy Digital Capital Management, has recently stated that a “herd of institutional investors” is coming towards the cryptocurrency ecosystem, and that these will inevitably invest in initial coin offerings (ICOs).
The billionaire investor’s comments came during his keynote speech at Blockchain Week Korea. In a subsequent interview with TheStreet, Novogratz revealed he believes institutional investors are “slowly coming to the realization that blockchain will be internet or Web 3.0.”
This realization, he said, will see them want to enter the market, for the same reason they started investing in web-based companies years ago. Per the hedge fund manager, institutional investors will initially invest through venture-capital funds. In fact, some are already investing through funds like Sequoia, Polychain, and Benchmark, he said.
The second way they’ll enter the market will see institutional investors participate in ICOs. He was quoted as saying:
The second step for them will be buying the coins and/or the ICOs themselves, but many of them are participating in the ICOs already through their venture investments.
Novogratz is a well-known bitcoin bull, who’s also invested in the controversial cryptocurrency EOS. When asked about being the “biggest participant” in it, he claimed that thanks to EOS’ “delegated proof-of-stake” model – which sees it elect 21 block producers (BPs) – will allow it to process more transactions than other blockchains, given the computing power these BPs have.
Per the billionaire, EOS’ blockchain is already processing 5,000 transactions per second, and “should be doing 50,000 transactions per second in a few months.” He added this makes it the first blockchain where “commercial applications can be built and experimented with.”
He conceded, however, that the network’s transaction throughput comes at the cost of decentralization. As CryptoGlobe covered, the top 1.6% of the cryptocurrency’s holders own 90% of its supply.
Per Novogratz, we’ll see “over the next three, perhaps four to five, years which blockchains that other projects want to build on,” presumably implying we should let the market decided which projects will make it.
During his interview, he further noted that security tokens are a way to buy a “percentage of revenue and a percentage of profits in a company,” making them feel like equity. He added:
Why would you use a security token versus equity? Because you're going to secure something that wasn't available with equity. So if it's taking a piece of art and fractionalizing it, it will trade with the volatility of the art market, which is still volatile but it's not nearly as high as what we are used to with crypto.
Mike Novogratz has in the past argued that the US Department of Justice’s (DOJ) criminal probe into potential bitcoin price manipulation is a “good thing” as it will deter bad actors in the market.
Various companies in the sector have seemingly been expecting an “institutional invasion,” given a recent increase in institutional grade products and services. Coinbase, for example, recently launched Coinbase Custody, in an attempt to take down entry barriers through custodian services. A Bitcoin ETF, which may soon be approved, may help bring in institutional investors.