Mike Novogratz: ‘Investors Will Continue Pouring Into Speculative Assets’

Novogratz said the big story in the traditional financial markets right now is liquidity, noting that with even more liquidity coming down the pike via Fed stimulus, there will be volatility. The Galaxy Digital chief admitted to having “waived the white flag” after being bearish on stocks, noting that investors are flocking to speculative assets with rates as low as they are. This includes Bitcoin and Ethereum. Galaxy Digital also has a large bitcoin position, one that he revealed to BeInCrypto, that he’s been adding to of late. He pointed to assets correlated to risk, saying that the correlation between bitcoin and stocks is being driven by liquidity, stating,

“Gold and bitcoin and Tesla…I think in the long run, stores of value like gold and bitcoin will decouple from equities. It is a possibility that we’re going to see that decoupling. What’s been driving price is liquidity. So right now it makes sense to me that these risks are correlated.”

"We are going to see over the next 10 yrs a rebuilding of the financial infrastructure of this country," says @Novogratz. "It was the COVID virus that really accelerated adoption of crypto–the macro story with #btc, and more maybe important story of digitalization of all cash." pic.twitter.com/ofSFvH6IZy

— Squawk Box (@SquawkCNBC) October 23, 2020

“Shot Heard Round the World on Wall Street”

PayPal’s expansion into cryptocurrencies has also gripped Wall Street investors. Novogratz, a former hedge fund manager at Fortress, referred to PayPal’s move as “the shot heard round the world on Wall Street.” He went on to describe PayPal as the “30th biggest bank in the US in deposits,” saying it won’t be long before every financial institution — from Bank of America to Morgan Stanley — will be asking how to become engaged.

It isn’t hard to see why. Coins like ethereum have achieved gains in the 200% range year-to-date, while bitcoin-friendly Square stocks have advanced too. Bank stocks like Wells Fargo and Citi, however, are down on the year. Novogratz believes that there will be a “rebuilding of the financial infrastructure” in the United States over the next decade.

Boll Weevil of Bitcoin

Novogratz compared the condition of the bitcoin market to the state of Alabama in the early 1900s. Were it not for the boll weevil, which destroyed the cotton crop; farmers might never have diversified to peanuts as a cash crop. In the same way, the COVID-19 pandemic, Novogratz suggests, has been an accelerator of Bitcoin adoption. This two-pronged dynamic includes the digitization of cash on the one hand and the macro story on the other. The next wave of Bitcoin adoption, Novogratz predicts, will include the credit card companies as Visa and Mastercard jump into the fray. *Direct quotes are a rough translation from the live interview on CNBC.