On July 21, 2023, Michael Novogratz, the founder and CEO of Galaxy Digital, appeared on “Squawk Box” and shared his insights on a range of topics, including the current state of the markets, the rise of artificial intelligence (AI), and the future of Bitcoin during a conversation with con-anchor Joe Kernen. Here’s a comprehensive recap of the Galaxy Digital CEO’s thoughts.

To recap, the lawsuit initiated by the SEC in December 2020 alleged that Ripple Labs and its executives Bradley Garlinghouse and Christian A. Larsen unlawfully offered and sold securities, contravening Section 5 of the Securities Act of 1933. After a series of hearings and deliberations, Judge Analisa Torres, a district judge at the United States District Court for the Southern District of New York, gave her ruling on July 13, 2023.

Here is what Judge Torres said about the XRP token:

“XRP, as a digital token, is not in and of itself a “contract, transaction[,] or scheme” that embodies the Howey requirements of an investment contract.“

Novogratz began by discussing the current market trends, attributing the rapid adoption of AI as a key driver behind the market’s momentum. He observed that several stocks with an AI component have been on the rise, fueling the market’s overall performance. However, he cautioned that such trends are typically short-lived, lasting around 12 to 18 months, and that the market’s enthusiasm for AI might be inflating a bubble.

He also touched on the current state of the economy, noting that economists have consistently underestimated the resilience of the economy. He attributed this to the unprecedented fiscal response to the COVID-19 pandemic, which differed significantly from the traditional monetary responses to crises we’ve seen. According to Novogratz, the widespread implementation of universal basic income (UBI) and the normalization of 5% budget deficits have created an economic environment that we’re not accustomed to, which could be why traditional economic models are failing to accurately predict outcomes.

Novogratz suggested that the economy might eventually slow down as the effects of these fiscal measures wear off. However, he acknowledged that the timing of this slowdown is uncertain as the economy continues to post strong numbers.

Turning his attention to Bitcoin, Novogratz argued that the cryptocurrency has its own unique story. He linked the normalization of 5% budget deficits to the rise of Bitcoin, suggesting that in the long run, someone will have to pay for the government’s spending, and that’s where Bitcoin, along with gold and silver, comes into play. He sees these assets as a hedge against the potential fallout from fiscal irresponsibility.

Novogratz also highlighted the ongoing adoption cycle of Bitcoin, driven primarily by retail investors who continue to buy the cryptocurrency. He expressed optimism about the future of Bitcoin, especially with the prospect of a Bitcoin ETF on the horizon. He confessed that he feels more comfortable going long on Bitcoin now than he did six months ago, as he can see the future of the cryptocurrency becoming clearer.

When asked about the regulatory landscape for Bitcoin, Novogratz pointed out that the rules are far from clear, contrary to what some regulators might claim. He cited the recent Ripple lawsuit as evidence of this lack of clarity. He also noted that there is a growing call for regulators to provide clearer guidelines for the cryptocurrency industry.

In particular, Novogratz said:

“The rules are absolutely not clear. The judge just basically said to the SEC you’re wrong.“

Novogratz expressed his confusion over the anti-crypto stance of some progressives, including Senator Elizabeth Warren. He also acknowledged the tension between Bitcoin and central banks, given that Bitcoin has been touted as a potential global currency, which could threaten the status of the dollar. However, he prefers to think of Bitcoin as digital gold, a store of value, which he believes is a less threatening concept for central bankers.

Featured Image Credit: Photo / illustration by “sergeitokmakov” via Pixabay