Michael Novogratz, a somewhat legendary figure, former macro hedge fund manager at Fortress, current head of Galaxy Investment Partners, becomes true bitcoin evangelist, raising $500M for a new cryptocurrency hedge fund, according to the interview with Bloomberg.
He became bitcoin amateur as far back as he was managing billions of dollars in a macro fund at Fortress. That time, however, he failed to score his first big win and couldn’t boast much success until leaving the New York-based firm two years ago.
The Novogratz’ fund, called Galaxy Digital Asset Fund, is believed to become the largest, but not the first one – according to data from NEXT, a financial technology analytics company, there are at least 75 such crypto funds in business.
As some unverified sources state, Mr. Novogratz will invest $150M of his own money into a new enterprise, simultaneously seeking some additional cash from “family offices, wealthy individuals and fellow hedge fund managers.”
This risky money-maker must have a good nose for opportunities: indeed, not everybody would dare to create multimillion crypto-fund when most large institutions have become rather skeptical about cryptocurrency market due to legitimacy issues and concerns about high volatility of its mostly unregulated instruments.
The situation is heated up by the fact that the leading token has become a target for criticism: JP Morgan Chase chief executive Jamie Dimon declared bitcoin a “fraud” saying he would fire any trader known to be trading the cryptocurrency, Ray Dalio, the founder of Bridgewater Associates, said that bitcoin is “a bubble”, “a highly speculative market”, and a weak store of value, and Rainer Michael Preiss, executive director at Taurus Wealth Advisors, stated that some CEOs of US banks are quite afraid of Bitcoin.
As for bitcoin being a “bubble”, Michael Novogratz seems to share Mr. Dalio’s point of view:
“This is going to be the largest bubble of our lifetimes. Prices are going to get way ahead of where they should be.”
But, in contrast with a majority of frightened investors, who see just volatility, he sees opportunity:
“You can make a whole lot of money on the way up, and we plan on it.”
Mr. Novogratz explained:
“In a lot of ways, this is a market like any other market. You see the psychology of fear and greed in the charts the same way you’d see it in charts of the Indonesian rupiah or dollar-yen or Treasuries.”
Today, major stimulus for investors to draw into this highly volatile digital environment is first of all cyptocurrencies’ exponential surge in price, and then lack of correlation to traditional investment assets.
Bitcoin, for example, multiplied five times in price this year before dropping in September due to China’s crackdown on digital currencies. While some crypto enthusiasts freaked out, others managed to make money from this quite sticky situation:
“I sold at $5,000 or $4980,” – said Mr. Novogratz. “Then three weeks later I’m trying to buy it in the low $3,000s. If you’re good at that and you’re a trading junkie, it’s a lot of fun.”
In this regard Ari Paul, former portfolio manager for the University of Chicago endowment and co-founder of cryptocurrency investment firm BlockTower Capital, rightfully stated:
“The criticism, the concerns, the fears have been present throughout almost the entire market’s history. When everyone thinks bitcoin is a safe and attractive investment, it won’t be a good investment.”
Being positive about Bitcoin and Ethereum (which is also up 2100 percent since 2016), the key digital currencies of the $142B market, Michael Novogratz goes so far as to predict that the total cryptocurrency market capitalization can reach $5 trillion by 2022.
Indeed, if the Nasdaq got to $5.4 trillion in 1999, why couldn’t it be as big?