By
Steve Muchoki
April 17th, 2024
Bitcoin is down more than 80% from its all-time high, dragging most major cryptocurrencies with it, including the likes of Ethereum and Ripple’s XRP. Despite this, Novogratz remains confident that Bitcoin will make a comeback
A former partner at Goldman Sachs who is popularly called the “pretty face of cryptocurrency” Mike Novogratz, said that he is now the ugly face of the bust.
Talking to Bloomberg, he pointed at SEC sanctions on certain ICOs and the uncertainty surrounding Bitcoin Cash’s hard fork as the reasons behind Bitcoin’s drastic fall from $6,200 to $3,400.
However, Novogratz remains confident that Bitcoin will make a comeback.
“I do believe Bitcoin is going to be digital gold. We have a business that we think can break even next year, if not make money. We’ve got plenty of cash to run the business for a long time. I keep telling my guys we’re a surfer getting ourselves in shape for when the next wave comes, and when the wave comes we’d better be the Laird Hamilton of crypto.”
First, says Novogratz, they thought of crypto as of a bear market.
“I went into it thinking in the long run crypto is going to be a real structural shift in the world and I can just hedge my portfolio. And to be fair, we did a really great job not losing money the first 60 percent down. What you forget is that a market like Bitcoin that’s down 84 percent has dropped 60 percent—and then another 60 percent. That’s where the pain happens. You start buying Ether again, because it’s only $400 after being at $1,300. But then it drops to $100, and you’ve lost 75 percent of your money. We haven’t done horribly in that context, but we’re still down.”
He then explains what he thinks it’s next for crypto-world. He invested in a company called High Fidelity, which is a virtual world.
“Me and you, we’ll sit down, and we’ll have virtual beers. People think I’m crazy when I say that, but Second Life does $500 million a year of GDP, real money traded back and forth in a virtual world with old technology. That’ll be the first use case where blockchain really works.”
One of Novogratz ventures in the field of digital currency is the cryptocurrency bank Galaxy Digital LP which began trading back on August 1st, 2018. The bank was off to a very slippery start, losing 20 percent per share in a single day, which added to the company’s overall estimated losses of about $134 million in Q1 of 2018. At the time, the former Goldman Sachs partner once again said that he thinks “we’ve pretty much bottomed.”
However, the market has plummeted since, as Bitcoin lost roughly another 60 percent of its value. Yet, Novogratz says that the situation is “not as dramatically as one would think.”
Bitcoin Price Rise was Like a Drug High
Addressing the fears surrounding Bitcoin he explains the price rise as a drug, “an instance of testosterone boiling over and its fall led to pessimism and rampant fear.”
He said:
“That was a drug, and I don’t say that lightly…there’s the pessimism, and the fear, and the “Oh my God, it’s going to zero.” But it’s not going to zero. We’re at the methadone clinic.”
Novogratz had already been saying that the Bitcoin could hold its position till the end of the year and maybe rise, but then disaster struck. He thought Bitcoin, “was going to hold at $6,200…. but then Bitcoin Cash decided to fork again.”
He also mentioned that ICO legislation by the SEC increased investor panic:
“The SEC came out and sanctioned a few ICOs and said- oh, by the way, your investors can sue for damages. That scared the heck out of a lot of people.”
Novogratz further added that “the ICO market is pretty much dead right now,” however, the regulatory body, “doesn’t want to kill this innovation.”
Many crypto proponents of Bitcoin have equated the top crypto to digital gold, Novogratz is one among them, he said:
“That means Bitcoin is the only one of the coins out there that gets to be a legal pyramid scheme. Just like gold is. All the gold ever mined in the history of the world fits in an Olympic-size swimming pool. You’re out of your mind to think that pool’s worth $8 trillion. But it is because we say it is.
While I believe in the underlying technology and believe in the crypto movement, when prices get stupid, I sell. A lot of my friends in crypto just couldn’t let go. They were saying that this is going to change the world. Revolutions don’t happen overnight. I’d be walking down the street, and people would come up to me wanting to take selfies. That’s when I started to think, OK, this is weird.”
Always Cautious About Bitcoin as a Currency
It’s more than obvious that he is still being cautious. A year ago, he was known as one of the biggest pro-bitcoin advocates but always saying that bitcoin will be difficult for governments to shut down.
“I’ve got concern that if price movements go higher we’re going to get more regulation, but I think it’s hard to shut down. I don’t think that’s a probability. Banks will be slow to move into the industry,” Novogratz then said, adding that he “doesn’t see quick adoption of bitcoin as a currency.“
He also said that one of the big risks out there right now is that prices are moving so fast that regulators are going to get nervous.
“I could legitimately see bitcoin go $13,000, $14,000, $20,000, $25,000 and see somebody balk.”
He also warned on the fact that right now most regulators, including those in the U.S., are working with the digital currency system and are “intrigued” by it.
Today, one thing where Novogratz remains firm is that he reiterates his view saying institutional entry is key for the Bitcoin price surge. Unless that happens, a sustainable price surge in Bitcoin seems a distant dream. Novogratz says that perhaps we can see a significant institutional money flow in the first half of next year, 2019.
Steady Growth or Nuclear Winter for Crytocurrency?
Despite a huge cryptocurrency market crash, VC billionaire Tim Draper believes, the value of Bitcoin will keep going higher in the upcoming years. Speaking to Thiel Macro’s Mike Green earlier this month, the billionaire said he believes virtual currencies will eventually overtake fiat currency, making up two-thirds of the world’s currency value.
“Down the road, when we can easily spend, or invest, or do whatever we want with cryptocurrencies—they’re frictionless, they cost you less,” Draper told
On the other hand, the billionaire investor and venture capitalist Jim Breyer believes that the promise offered by the technology is too great for it to be permanently buried by short-term market movements. Breyer kept saying that the technology is too big to be dismissed just because of a temporary bear market. He warned that “we’re close to a nuclear winter right now with cryptocurrency.”