On March 13, 2024, Michael Novogratz, CEO of Galaxy Digital, joined CNBC’s “Squawk Box” to delve into the latest Bitcoin rally, examining the factors driving this surge, its implications for the broader cryptocurrency market, and the potential for a spot Ethereum ETF.

The Drivers Behind Bitcoin’s Latest Rally

Novogratz emphasized that the recent surge in Bitcoin’s price, which saw it surpass the $73,000 mark, is largely an adoption story, propelled by a shift in mindset towards broader acceptance of Bitcoin in the U.S. This acceptance, according to him, is reflected in political developments and an increasing interest from Baby Boomers who are starting to invest a portion of their wealth into Bitcoin. He pointed out that Bitcoin holders tend to measure their net worth in Bitcoin rather than dollars, indicating a strong loyalty to the cryptocurrency.

Gold, Fiscal Stewardship, and Macroeconomic Factors

In his analysis, Novogratz also touched upon the performance of gold, which has been rising alongside Bitcoin. He attributed this to the political climate, with both major candidates appearing to favor significant spending, thus undermining fiscal prudence. He argued that Bitcoin serves as a “report card on fiscal stewardship,” highlighting the lack of fiscal discipline in Washington, D.C., as a catalyst for both Bitcoin and gold’s appreciation.

The Ethereum ETF Debate

Novogratz discussed the ongoing debate within the SEC regarding the classification of Ethereum and the prospects for a spot Ethereum ETF. He highlighted the transition of Ethereum from proof of work to proof of stake as a pivotal point in this debate. Novogratz expressed confidence that, given the parallels with the approval process for spot Bitcoin ETFs, a spot Ethereum ETF could be on the horizon, contingent on the SEC’s final stance on Ethereum’s status as a security.

Price Predictions and Market Dynamics

Addressing the volatility and unpredictability of Bitcoin’s price, Novogratz shared his reluctance to make precise predictions but suggested that the asset is currently in price discovery mode, with the potential to reach $100,000. He underscored the importance of monitoring spot Bitcoin ETF inflows as a key indicator of Bitcoin’s price trajectory, suggesting that as long as inflows remain positive, the price is likely to continue its ascent. However, he cautioned that the market is frothy and investors should be prepared for potential corrections, though he personally doubts Bitcoin will fall below $55,000 without significant changes in the market.

ETF Inflows and Bitcoin’s Market Cap

Novogratz pointed out that while spot ETF inflows have been significant, they still represent a small fraction of Bitcoin’s total market cap, which stands at around $1.5 trillion. He underscored the importance of Bitcoin’s monetary policy, set forth in Satoshi Nakamoto’s white paper, as a fundamental reason for its appeal. In a world where fiscal policies are increasingly questioned, Bitcoin offers a credible alternative, preserving wealth and gaining traction globally.

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