Billionaire Michael Novogratz: Web 3.0, Not Bitcoin, Will Change the World

Michael Novogratz, the founder and CEO of Galaxy Digital, a full-service crypto merchant bank, has argued that Bitcoin (BTC) cannot change the world as it is just a currency, which only serves as a medium-of-exchange (MoE) and store-of-value (SoV).

Novogratz, whose comments during the ConsenSys’ Ethereal Summit on May 11, 2019, pointed out that Bitcoin has “established itself as a SoV” and that it is “kind of finished” in terms of having more use cases.

Bitcoin And Gold Are Social Constructs

The former partner at Goldman Sachs compared the pseudonymous cryptocurrency to other asset classes, including the gold bullion. According to Novogratz, both Bitcoin and gold can be considered social constructs.

Although the Princeton University graduate considers BTC to be “digital gold,” he believes that it’s limited to being used as means to exchange value. Because of this, Novogratz thinks the world’s most dominant cryptocurrency is “not going to change the world.”

Web 3.0, Not Bitcoin, Will Change The World

Web 3.0, an evolving set of protocols and standards for the new and more technologically advanced world wide web, does have the potential to transform how business is conducted and it may also drastically improve how people interact. This, according to Novogratz, who also noted that Web 3.0 is “a decentralized platform [for] processing information.”

He added that Web 3.0 protocols would be able to separate data storage and retrieval from information processing and that public blockchains such as Ethereum may play an important role in the future economy. However, Novogratz mentioned that there are a lot of other smart contract platforms that are providing solutions which are similar to what Ethereum offers.

Altcoins Need To “Prove Themselves”

Comparing the thousands of digital assets to the periodic table of elements (in Chemistry), Novogratz argued that altcoins have not yet established their market value as they still need to “prove themselves.”

The crypto entrepreneur also stated that “there’s no one building anything on the Litecoin blockchain”, however there are many different applications being built on the Ethereum (ETH) network.

Bitcoin To Return To Its $20,000 All-Time High

During the SALT Conference held in Las Vegas, Nevada, on May 9th, 2019, Novogratz said that the bitcoin price would most likely return to its previous all-time high of nearly $20,000. However, the billionaire investor cautioned that more damaging events such as the large-scale security breach suffered recently by crypto exchange Binance, could potentially cause the bitcoin price to plummet.

Bullish Bitcoin Investors Are Ignoring Institutional Bears

Neil Dennis

Bitcoin investors remained positive this week, despite data showing that bearish bets on the futures market had increased during the previous week.

Positioning data on CME Bitcoin futures showed that institutional managers held 14% more short positions in the seven days to Friday, June 21, than in the week before, according to the Commodity Futures Trading Commission (CFTC).

Futures trade allows investors to back an asset's losses as well as gains: short positioning means backing an asset to fall in price over a defined period.  The increase in the CFTC short position data on CME Bitcoin futures, therefore, would indicate growing bearishness by the larger institutional players.

Playing it by the Charts

They may have been playing it by the charts. The previous two tops occured in mid-May when the price of Bitcoin reached a high of $8,352 before falling back nearly $1,000, and then at the very end of May reaching $9,066 before falling back to $7,807.

Bitcoin's price performnace

The chart shows that in the week to June 21, when shorts on CME Bitcoin futures grew, Bitcoin pushed up above $10,000, in a chart pattern that might have led many to believe another pullback was imminent.

This drop, predicted by many institutional investors, never came, however, and private investors continued to back the Bitcoin rally. Indeed, the CFTC report showed that smaller investors continued to hold more long positions - backing the continued rally: investors with fewer than 25 Bitcoin futures contracts showed four times as many long positions than shorts.

Short Covering

This may help explain how the rally of the last couple of weeks gained momentum, as those on the institutional side joined the buying to cover their short positions.

Tanya Abrosimova, analyst for FXStreet, said:

Many experts believe that at this stage Bitcoin is driven by FOMO (fear of missing out), while the market repeats the situation of late 2017.

It is also likely that Facebook's announcement about the lauch of its Libra cryptocurrency caught the institutional shorts on the wrong side of the market. Since the Libra announcement on Tuesday, June 18, Bitcoin has gained more than 30%.

Abrosimova added:

Looking technically, Bitcoin has been growing strongly for eight days in succession, which is the longest period of uninterrupted growth since December 2017. As BTC/USD is trying to take out a new barrier at $12,500. Once it is out of the way, the next bullish target of $13,000 will quickly come into view.