Jul 23, 2021
How To Stay Optimistic When The Crypto Market Collapses: Lessons From Mike Novogratz
Are you nervous about the future of crypto right now? If so, we can easily understand — because we are, too. After Bitcoin at $60,000 in May, we’re seeing a bear market for all cryptocurrencies, and it’s unclear when the trend will reverse.
Large investors with a major part of their portfolios in cryptocurrency risk losing everything in such situations. But despite the market crash, some of them remain optimistic about the future of digital assets — like Mike Novogratz, a billionaire, CEO of Galaxy Investment Partners. He still believes in the long-term value of Bitcoin and claims crypto is the future of finance. Let’s see how Novogratz manages to maintain such optimism amid the bear market.
Mike Novogratz: a crypto enthusiast from traditional finance
Many Bitcoin optimists originate from the crypto community — such as developers, early investors, etc. Mike Novogratz spent decades in traditional finance which is known for often looking down on cryptocurrency. But unlike his colleagues, Mike’s huge experience in hedge funds and institutional investments helped him see the potential of crypto.
Novogratz started in the good old 1989-s, making his first fortune in Goldman Sachs on bond trading. The booms of Asian “tiger economies” helped him generate solid returns, which made him a partner by 1998. He continued this path, joining Fortress Investments and helping it cope with the 2007–2008 crisis.
By that time, Novogratz had already become a billionaire. The turmoil severely challenged his position, but cryptocurrency helped him reach this status again. In 2017, 20% of Mike’s net worth was in cryptocurrency, and by 2021, he reported his portfolio was by 85% made of digital assets. Galaxy Investment Partners company that Novogratz founded in 2018 boasts of several successful investment rounds including Bitfury crypto infrastructure firm.
“This is not us hunting on coins with funny names”
On May 12, 2021, Bitcoin started to sharply collapse. May 18, the coin lost 25% of its price within 24 hours and 50% in total compared to last month’s all-time high. However, this doesn’t look like the 2018 crash to Novogratz.
In his interview following the drop, Mike said that was a “liquidation event” and a “setback for the wallets and for the investor base.” People lost a lot of money, but that’s how the market self-regulates: when people feel that the asset is overbought, they cash out and take profits. According to Novogratz, the setback was caused by a “confluence of events — tax day, Elon Musk tweets, whatnot” that changed the trend.
Novogratz is optimistic about this bear market endgame. “The crypto revolution has happened”, and the current drop won’t change this. “The story hasn’t gone anywhere”, — Mike says.
Despite Novogratz being too optimistic to some people, he stays in reality. He isn’t waiting for the instant return of growth: “Humpty Dumpty never gets put back together in two days … when he cracks.” The investor promised that the market would consolidate somewhere around $36,000–38,000 for Bitcoin. As we see 2 months later, the first cryptocurrency dangles around $32K with no more drastic collapses.
According to Novogratz, the market crash in May only proved the concept of the digital assets’ ecosystem. He expects Bitcoin to replace gold in the years to come and assumes that it rather works as a safe haven asset than a means of daily payments. As for cryptocurrency in general, Novogratz believes “this is not us hunting on coins with funny names. This is a serious approach to rebuilding the financial architecture of the world.”
Optimistic in the long term: the run for institutional investors
Why is Novogratz so optimistic about the future of cryptocurrency? As we’ve already seen, he is not one of those Bitcoin maximalists who contributed to the early days of digital coins and simply got captivated by their possibilities. Rather, Mike works directly with people who became one of the drivers for Bitcoin’s growth in the fall 2021 — institutional investors.
Big banks, hedge funds, investors from Wall Street are the people who Novogratz’s Galaxy Digital is persuading to invest in cryptocurrency. The firm positions itself as the “bridge between the crypto and the institutional worlds”, and it seems to live up to its name.
Galaxy has $1.6 billion of assets under management, invests in hundreds of companies, including $295 million put in hyper-growth startups. The firm has 300 institutional trading counterparts that it helps to trade, manage assets, invest, and mine. According to the Galaxy’s presentation for investors, its net income grew from $336 million in Q4 2020 to $860 million in Q1 2021. This is quite a considerable gain compared to Wall Street.
Novogratz sees with his own eyes how everything is moving forward, and that must be the source of his optimism. Mike’s vision is shared by his outstanding team: professionals from Goldman Sachs, Blackrock, Fidelity, and Google believe that 91% of institutional investors will have “digital asset exposure” in 5 years. That is, the big investment companies, hedge and pension funds will invest in crypto themselves or create tools for their customers to do so.
Galaxy Digital pioneers the way, showing institutional investors how to allocate money in crypto, engaging many in this activity. Today, the matter is simply hard to ignore from Wall Street.
The job of Mike Novogratz
Everyone has the freedom to think the way they’re comfortable with. If you’re pessimistic about the current trend in crypto, this article will barely change your mind. Its aim is simply to show: cryptocurrency does not only inspire small investors attracted by high and fast yields for their $100–1,000. It’s also in the focus of those who risk millions and billions, and moreover — or those whose mindset was shaped in the era of traditional finance. Mike Novogratz is one of those, and not only he believes in the future of cryptocurrency himself, but infects hundreds of his clients with this vision. “Our job won’t be done before every individual on Earth has a Bitcoin wallet”, he says.
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