Michael Novogratz, the founder, chairman, and CEO of Galaxy Digital, recently appeared on CNBC’s “Squawk Box” to discuss various aspects of the cryptocurrency market with con-anchor Joe Kernen.
Some Highlights from Novogratz’s Interview:
- Bitcoin’s Recent Surge: Novogratz noted that Bitcoin’s price increase, particularly after the Federal Reserve hinted at a potential easing phase, reflects its role as an alternative to fiat currencies and a response to money printing policies. Bitcoin’s price has risen by 150% over the year, a significant rebound that counters the skepticism around it.
- Fed’s Dovish Stance: He emphasized the importance of the Fed’s recent dovish stance, which has influenced various markets, including fixed income and equities. This shift is based on decreasing inflation without a corresponding collapse in growth.
- Spot Bitcoin ETF Approval: Novogratz expressed optimism about the approval of a spot Bitcoin ETF before January 10th, a development he believes will further fuel the crypto market. He anticipates that a spot Bitcoin ETF, once approved by the U.S. SEC, will start trading after six to eight weeks, adding more momentum to the crypto sector.
- Crypto Market’s Current State: He observed that crypto stocks are trading with high enthusiasm, almost like a mania, which he finds slightly concerning due to the potential for corrections. However, he maintains that the market is still in a bull phase.
- Bitcoin as a Safe Haven or Speculative Asset: Addressing the future role of Bitcoin, Novogratz speculated that it could serve as both a safe haven and a speculative asset. He expressed little faith in fiscal prudence from the U.S. government, especially going into an election year with projected budget deficits. This scenario could lead to more institutional investors allocating a small percentage of their portfolios to Bitcoin and Ethereum, potentially driving prices higher.
- Debunking Negative Perceptions: Novogratz countered the negative perceptions of Bitcoin by influential figures like Jamie Dimon and Elizabeth Warren. He argued that Bitcoin’s use for illicit activities has been overstated and that fiat currencies are more commonly used for such purposes. He highlighted that respected investors globally recognize Bitcoin’s value, challenging the right of critics to determine what has value.
- Regulatory Landscape and Legislation: He discussed the regulatory environment, noting that both Democrats and Republicans in Washington, D.C., are interested in passing legislation to provide a clear framework for cryptocurrencies and stablecoins. Novogratz expressed hope for progress post-election, regardless of the administration in power.
On 8 December 2023, Novogratz appeared on CNBC’s “Squawk Box” with co-anchor Andrew Ross Sorkin.
Here are some highlights from that interview:
- Jamie Dimon’s Stance Against Crypto: During a Senate Banking Committee hearing on 6 December 2023, JPMorgan Chase & Co. CEO Jamie Dimon expressed strong opposition to cryptocurrencies. He suggested that the government should consider shutting down the crypto industry due to its potential for regulatory evasion and illicit activities.
- Regulatory Focus and Proposed Legislation: The cryptocurrency sector is facing increased regulatory scrutiny in Washington. Senator Elizabeth Warren is pushing for the Digital Asset Anti-Money Laundering Act, aiming to extend KYC regulations to the crypto industry. During the hearing, leading bank CEOs concurred on the need for applying standard anti-money laundering protocols to the crypto sector.
- Bitcoin’s Price Rally: Novogratz commented on Bitcoin’s significant price increase, which has seen a rise of over 150% this year, surpassing $44,000. He attributed this rally to moderating U.S. rate expectations, as indicated by the drop in the 10-year Treasury yield. He noted that this surge is somewhat decoupled from movements in the S&P 500 or Nasdaq, pointing to unique factors driving the crypto market.
- Reaction to Jamie Dimon’s Comments: Novogratz expressed surprise at Dimon’s suggestion that cryptocurrency should be banned, highlighting that many of JPMorgan’s clients, including notable investors, see value in Bitcoin. He criticized Dimon’s view as being disconnected from the widespread belief in Bitcoin’s value.
- Spot Bitcoin ETF Developments: Novogratz discussed the progress in developing spot Bitcoin ETFs, noting detailed updates in S-1 filings by entities like BlackRock and Bitwise. He emphasized the SEC’s scrutiny, particularly regarding custody arrangements and the creation of an Intraday Indicative Value (IIV) for these ETFs.
- Intraday Indicative Value (IIV) Explained: IIV is crucial for ETFs, especially in volatile markets like cryptocurrencies. It offers a real-time estimate of an ETF’s asset value, helping investors make informed decisions by indicating whether the ETF is trading at a premium or discount to its fair value.
- SEC Approval of Spot Bitcoin ETFs: Novogratz expressed optimism about the SEC’s eventual approval of a spot Bitcoin ETF. He cited changes in the regulatory landscape and the nature of questions in the application process as indicators of this shift.
- Institutional Interest in Cryptocurrencies: He observed a growing institutional interest in cryptocurrencies, as evidenced by the rising CME futures basis for Bitcoin and Ether. This suggests that institutions might be paying a premium for crypto exposure due to limited direct access to BTC or ETH spot markets. Additionally, the increase in long-term Bitcoin holders implies that recent price appreciation has not triggered profit-taking among these investors.