Novogratz Explains Why Facebook’s Libra Is ‘Stunningly Important’ for Crypto Space

Siamak Masnavi
  • 20 Jun 2019

On Tuesday (June 18), during a phone interview with CNBC's morning news and talk program "Squawk Box", Mike Novogratz, a former Goldman Sachs partner, as well as Founder and CEO of crypto-focused merchant bank Galaxy Digital, said that Facebook's project Libra was "stunningly important" for the entire crypto space.

Novogratz started the interview by saying that one of the things that has been driving up the price of Bitcoin recently has been the excitement around Facebook's entry into the crypto space, and Facebook's Libra announcement earlier in the day had just "credentialized" (or legitimized) the idea of cryptocurrencies.

Next, he explained that although some institutional investors, such as the Yale endowment or the Harvard endowment, have already started investing in crypto, this announcement would "just accelerate the movement" because before the main concern of institutional investors was "if I invest, I might look stupid" and now, it's going to be "if I don't invest, I might look stupid."

Novogratz then said that since Bitcoin has already had a "pretty big run" this year, it would probably see some price consolidation at this stage (the old "buy the rumor, sell the fact" syndrome), but "it really wouldn't surprise" him if Bitcoin was "significantly higher by the end of the year."

One of the co-anchors of Squawk Box then asked if Novogratz was going to sell Facebook stock and buy Bitcoin instead.

Novogratz explained that with project Libra, it was important to note that there are two types of coins/tokens:

  • "the main coin, Libra (LBR), which will be the payments coin"; he referred to Libra as a "stable-ish" coin (Facebook itself admits that Libra is more of a low-volatility cryptocurrency than a pure stablecoin) that is "tied to a basket of currencies"; this would be traded for goods/service, but "there wouldn't be a great speculative trade on it"
  • "a security token" (the Libra Investment Token), which represents "ownership in the central bank"; he said that this is the one that investors would probably want to go long on

Co-anchor Betty Quick then asked Novogratz why should this announcement about project Libra help Bitcoin since Facebook specifically had chosen not to use Bitcoin for this project. 

Novogratz pointed out that recently people have been thinking of Bitcoin more as a store of value (i.e. digital gold) than as a means of exchange (i.e. for payments), and that what is interesting about the announcement is that it "credentializes the whole space." And what do institutions usually first buy when they want to invest in crypto? Bitcoin.

Novogratz then said that he expected the the upcoming Telegram (GRAM) token sale to also be positively impacted by this news, and the more good news we have, the more "energy and investment dollars" would come into the "investment space."

One of Quick's colleagues than asked if Novogratz was not surprised that were no banks among the list of founding members of the Libra Association. Novogratz answered "not really" since "in a lot of ways, this is the disintermediation of the banks", before adding:

"I think I'd be nervous if I was the banks. This is cutting out the banks in lots of ways."

In another interview, this time with Bloomberg, this is what Novogratz had to say about Libra:

“[Libra] is a game changer in that it credentializes crypto. We now have many of the largest companies in the world participating. It is now a matter of time before crypto and blockchain are part of both the consumer and financial infrastructure of the world. This is extremely bullish for Bitcoin and the whole ecosystem.’’

Another person that Bloomberg spoke to was Jeremy Allaire, the CEO of Circle Internet Financial, who said the following about the Libra news:

“This is a massive inflection point for the crypto industry -– it’s an extremely positive development for this broader movement towards decentralized platforms and open finance, and the ability to connect every person in the world to an entirely Internet-based financial system. It is the transition point where people start to realize that crypto and this infrastructure is going to help change the way the international economic system functions.’’

 

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