During a phone call with investors announcing first-quarter results, Mike Novogratz - founder and CEO of cryptocurrency investment firm Galaxy Digital - said the digital asset category needs to prepare for a turbulent economic race in the coming months.
Novogratz is a strong supporter of Bitcoin
"The cryptocurrency is likely to be related to the Nasdaq until it reaches a new balance," Novogratz said in a transcript of the earnings call. "My instinct is that there is still some damage to be done, and that the market will move in a very erratic, volatile and difficult way at least for the next few quarters, before people perceive that we have reached a balance."
Novogratz is a strong supporter of Bitcoin. And if you want to be too, find out with our guide how buy Bitcoins. It recently predicted that the oldest and most valuable cryptocurrency will reach a price per coin of $ 500.000 within five years. However, at the time of writing, according to CoinMarketCap, Bitcoin is trading on cryptocurrency exchanges at $ 29.510,48, which is around 95% lower than Novogratz's predicted price spike.
In any case, when it comes to cryptocurrencies, Novogratz has bet on its money and that of its customers. In March 2022, his company Galaxy Digital partnered with Goldman Sachs to offer access to an Ethereum investment fund to Goldman clients willing to deposit a minimum of $ 250.000, the same they offer to large investors interested in the Bitcoin. He and his clients focus on the long run.
Why is this fervent cryptocurrency bull depressed for the near-term outlook?
The main reasons Novogratz listed for short-term volatility and expected losses for cryptocurrencies include the six interest rate hikes announced by the Fed this year to try and curb rampant inflation. Novogratz also said that rate hikes will discourage borrowing from companies that have used the Fed's cheap money - sometimes free - to expand operations or to raise balance sheets to boost profits.
But that's coming to an end, as newly released minutes of the latest Fed meetings show that the US Central Bank intends to aggressively accelerate rate hikes to reach its 3,13% target by mid-2023. 'tightening, Novogratz said in the call that such measures are necessary and that he is optimistic about the long-term prospects as institutional investors prepare to enter the cryptocurrency market.
“I went to institutional conferences, three or four different conferences, meeting all kinds of clients. Some are the biggest names in traditional finance: BlackRock, Blackstone, Citadel, Apollo, everyone is making great efforts in this [cryptocurrency] space without ever having been here. It is a wonderful tailwind for space, ”as Novogratz stated in the transcript.
While the future prospects for cryptocurrencies look good, the industry lost more than $ 200 billion in 2022. It's not too far-fetched to predict things will get worse before they get better.
