On Thursday (June 16), the day after Federal Reserve Chair Jerome Powell raised its policy interest rate by 0.75%, billionaire Mike Novogratz was asked to share his thoughts on the crypto market.
Former hedge fund manager Novogratz is the Founder and CEO of Galaxy Digital, “a technology-driven financial services and investment management firm that provides institutions and direct clients with a full suite of financial solutions spanning the digital assets ecosystem.”
Novogratz’s comments were made during an interview on Wednesday’s episode of Bloomberg TV’s “Bloomberg Markets: The Close“, where he talked to Sonali Basak, Caroline Hyde, Romaine Bostick, and Taylor Riggs
“You have to hold crypto in context of what’s gone on macro… there were going be headwinds this year because the Fed was going to have to withdraw liquidity, and so assets that went up based on cheap money forever — if they’re growth stocks, or expensive watches, or crypto — were certainly under pressure all year long.
“What’s exacerbated this move in crypto is a bunch of leveraged players that had far more leverage than I think people thought… And so you talk about Celsius or Three Arrows Capital… that’s caused almost something similar to what happened in 1998 with Long Term Capital Management… Alleged market neutral players with monster leverage that’s being unwound and that’s created a ton of fear in the space. And so you see lots of credit being withdrawn from the space, and when credits are withdrawn you’ve seen prices collapse…
“I look at the U.S. stock market. It looks like it’s got probably 4% more to go to 3500, which is where the 200-week moving average is, where support comes in, and I think you’re seeing this liquidation of risk and cryptos’s got caught up with it.“
“My guess is leverage has been knocked out of the system, but Humpty Dumpty doesn’t get put back together right away. It takes a while to kind of sort through. There’ll be bankruptcy proceedings in many companies, and so I think while we should bounce off of $20,000 [for $BTC] and bounce off of $1,000 [for $ETH], it’s gonna take a little while for crypto to regain narrative, regain confidence…
“I 100% think there are people on the sidelines waiting to build, but I think the first buyers from the traditional sense are going to be being global macro hedge funds. The moment the Fed flinches and says ‘we raised enough, we can’t do it anymore’, I think you’ll see lots of traditional macro funds who’ve had a great year buy Bitcoin. We’ll add to our position at that point…
“Guys who have done this for a long time realize the soft landing is impossible. And so, the economy is going to go to recession. It’s gonna go into a recession fast… You’re going to see the economy just screech to a halt. That’s what the Fed needs to do to get inflation down. And so, we’re going to go through this awkward period where growth is going to be rolling over and inflation is still going to stay stubborn before it rolls. When the Fed sees it rolling and they signal the pause, then you’ll see crypto take off. You’ll see other assets follow.“
On March 29, Novogratz was interviewed by Joe Kernen on CNBC’s “Squawk Box”.
When Kernen asked the Galaxy Digital CEO when he expects to see a spot Bitcoin ETF, Novogratz replied:
I think we’re within a year. Listen, I think Genser has come, and he really wants to regulate crypto. He’s been doing it by enforcement, but at one point — he’s an intellectually honest guy — you can’t just keep postponing forever…
“The process with the SEC has been slow for companies trying to go through it, much slower than normal, but it has to have an end. And so, I’m hoping within the year. I’m not wildly optimistic anything happens anytime soon. There’s going to be congressional gridlock…
“Congress isn’t going to give any one of the agencies a roadmap on who gets to regulate. And so I think we’re kind of in this stasis position, but it does feel like things are moving in the right direction, albeit slowly.“
With regard to Novogratz saying that U.S. Treasury Secretary Janet Yellen was sounding much more crypto-friendly these days, he was referring to Yellen’s recent comments about crypto, which were made while she was being interviewed on March 25 by CNBC “Squawk Box” co-anchor Andrew Ross Sorkin.
After Sorkin told Yellen that Russia’s energy chief had expressed on March 24 the idea that it might start accepting Bitcoin as payment for oil and gas, he asked her what it said about where “we are in the crypto conversation.”
“Well, crypto’s obviously grown by leaps and bounds, and it’s now playing a significant role, not really so much in transactions, but in investment decisions of lots of Americans. And the President just issued, a couple of weeks ago, an executive order tasking us and other agencies with thinking about the regulation of crypto.“
Sorked then asked Yellen if this meant that she was less skeptical about crypto these days than she has been in the past.
“I have a little bit of skepticism [because] there are I think valid concerns around it. Some have to do with financial stability, consumer investor protection, use for illicit transactions, and other things. On the other hand, there have been benefits from crypto, and we recognize that innovation in the payment system can be a healthy thing. We would like to come out eventually with recommendations that will create a regulatory environment in which healthy innovation can occur.“