On Thursday (January 30), during an interview, former Goldman Sachs partner Mike Novogratz, who is the Founder, Chairman, and CEO of crypto-focused merchant bank Galaxy Digital, talked about why still loves gold and Bitcoin, why he prefers Bitcoin to altcoins from an investment point of view, and how his company invests/trades in the blockchain/crypto space.
Novogratz was being interviewed by Bloomberg Television Erik Schatzker on the show "Bloomberg Markets about his recent short of Tesla stock, his outlook on global stocks, and his thoughts on cryptocurrencies.
Shorting Tesla Stock
Not long before Tesla announced its Q$ 2019 financial results on Wednesday (January 28), Novogratz used his personal trading account to short Tesla stock (NASDAQ: TSLA), which has been performing even better than Bitcoin in 2020 (up 53% vs 30%). Novogratz looked at Tesla's price chart and decided to short the stock. Unfortunately for him, Tesla beat analysts' earnings forecasts by a wide margin, which caused the Tesla stock price to go up even further, thereby giving the shorts a good beating.
Here's Novogratz explaining his reasons for getting into this trade:
"You know, I had a great start to the year. The chart looks terrible. I got against my own rules when I said 'you know, don't shorten Elon Musk', and Tesla feels like Bitcoin... It's not a fundamental story anymore. So any bit of good news it's gonna shoot it up. I'll give it a couple days. I'll probably be able to get out of my short without that much pain, but was not a great morning.
"It should back off some at one point -- things just don't go to the moon. Luckily was a spiritual position. It's not gonna bankrupt me, but it hurt."
Novogratz was then asked by Schatzker to explain what he means when he says that Tesla stock is like Bitcoin. Novogratz said:
"So bubbles -- and there's a Tesla bubble going on. There's no doubt about this as a bubble. Bubbles happen around things that normally change the world... Tesla cars are amazing. He's got all kinds of technology. He's delivering, and so the story is so powerful [that] it sucks everybody in. It doesn't mean the company is actually worth that much.
"So I got cocky and tried to pick the top of the bubble, and I got a black eye... I probably should;ve waited until after earnings today."
What He Likes at a Macro Level
"First, we got to get through this virus out of China, and it's getting worse... There's a lot of volatility on how bad thing can get. We still don't know. Barring that, I think stocks are gonna race higher this year... To me, the charts look like stocks could go parabolic."
Novogratz is going long on stocks via call options:
"If I am wrong, it's not going to kill me. And so you can buy calls on NASDAQ, calls on S&P 500, calls on the NIKKEI, calls on the DAX. If that story plays out, great. The risk of that is either growth really slows, or we get inflation. The former may be more likely. You can hedge that."
Why He Still Loves Gold and Bitcoin
Novogratz who has long been an advocate for Bitcoin and sees it as "digital gold" once again took this opportunity to profess his love for both gold and Bitcoin:
"I stil love gold. I still love Bitcoin because because we've got too much liquidity around and we're debasing our currency over time... and so you gotta like gold and you gotta like Bitcoin."
Why He Prefers Bitcoin to Altcoins For Investing
When Novogratz was asked what are the charts telling him about Bitcoin at this point, here was his reply:
"Bitcoin had its bubble in 2017, and now it has become an asset. It's a weapon in people's portfolio. It is a version of gold -- we call it 'digital gold', and we're putting in plumbing all around the system to allow more and more people to buy it, so it trades. "It trades much much better -- doesn't trade like we're in a speculative bubble. It's grinding higher. It jumps a little bit, it recovers. There seems to be a bit under the marke, and so I'm thrilled the way it's trading... "If it hadn't rallied during Iran, if it hadn't rallied during this virus, I'd have been nervous, but it did. And so, I'm getting confidence in the Bitcoin position."
Schatzker then asked Novogratz if Bitcoin is the "winner takes all" cryptocurrency. Novogratz answered:
"I think Bitcoin is its own lane as digital gold and by far will have the largest market cap. Listen, gold has got a $9 trillion market cap. The best companies in the world are a trillion. So store of values -- there are very few of them. There's nothing else like gold. The rest of the periodic table from silver to copper and everything else needs a use case. The other cryptocurrencies need a use case, and it's gonna be a few years away, three, four, five years away before you really start seeing the blockchain ecosystem changing the world."
He went on to point out that this does not mean he is completely ignoring the other cryptocurrencies:
"We trade them. We don't have them as our core portfolio. We'll trade them both long and short. We're making big investments in the infrastructure around blockchain. I do think being a venture in this space makes a whole lot of sense." This is all early stage. Remember the internet bubble was 1999. We didn't get Facebook and the iPhone until 2005, 2006, and 2007. We're in that gap period, but tons of stuff being built, and it's an exciting space."