Mike Novogratz is a legend in the financial investments’ world. Lately he is dealing with cryptocurrencies, so much so that he is the CEO of the investment fund he created: Galaxy Digital Capital Management.
Recently, he participated at Beyond Blocks conference in South Korea, where he declared his point of view about the cryptocurrency mass adoption.
The theme is relevant, ’cause on the one hand it is assumed that the mass adoption of cryptocurrencies (and in particular Bitcoin, with Lightning Network) could make their value skyrocket, on the other it expects the financial markets entry soon with the so-called “institutional investors”.
“Mass adoption” means the cryptocurrency common use by the average citizen. To date, there are still few users of these technologies: it is estimated that about 25 million people in the world, compared to over 7 billion people on the planet.
Bitcoin, and cryptocurrencies in general, are still little used as a means of payment, but also as a store of value, and it is assumed that it still takes years before their use spreads
On the other hand, “institutional investors” means large low-risk capital managers, such as banks, pension funds, traditional investment funds, business banks, and so on. To date, in fact, the large capital invested in this sector comes mainly from medium / high risk funds, among which there aren’t the so-called “institutional” funds.
During the Korean conference, Novogratz said that when he founded Galaxy, their mission was to bring institutional investors in this area.
Now he has realized that when he meets a CEO or CIO of a traditional financial business they surprise him with a fairly thorough knowledge of the industry. In short, most haven’t taken the first step to enter yet, but apparently they are preparing to do so.
Furthermore, while at high levels, the traditional finance is still very cautious with cryptocurrencies, many younger managers are much more interested.
He also pointed out that there are already many large financial service providers who use blockchain and cryptocurrency, so there is no longer a clear distinction between the two sectors, traditional finance and new finance.
For Novogratz, the big problem for traditional investors is paradoxically the lack of a trust intermediary (a fundamental characteristic of Bitcoin and decentralized cryptocurrencies). In fact, they need to entrust the custody of their funds to a trusted intermediary, like a bank, and the current lack of this kind of intermediaries makes it still difficult to enter this world.
Furthermore, adequate understanding of these technologies and ease of use are still lacking. In this regard, however, Novogratz argues that there will be no need for all users to understand these technologies in detail, and that it will be enough that the user experience will no longer make them appear as something new and unknown, but instead consolidated and familiar. According to him, it will take five to six years to get there.
Finally, he also stressed the importance of a solid regulatory framework to achieve true mass dissemination. Also because regulators usually focus on institutions and professional users, while these technologies have appeal above all to common investors. That’s why, for Novogratz, regulators should protect small investor, and until today, in this sense, they have done definitely a poor job.
That said, he reiterated his position still strongly bullish towards cryptocurrencies, but he feels happy that regulators are taking interest in this sector, especially as regards the serious measures that have taken against scammers and manipulators of the market. In the coming years there will be more clarity on the legal aspects concerning this sector, and this will facilitate both mass adoption and the entry of institutional investors.