Former hedge fund billionaire and Galaxy Digital founder Michael Novogratz says he’s sticking with Bitcoin, as hedge funds move into the space.
In a new CNBC interview, the crypto investor says there’s plenty of economic uncertainty, but as the BTC halving approaches and the markets react to extreme measures enacted by central banks and fiscal agents, which have created a situation “we’ve never been in before”, people will ultimately make their move.
“I think there will be a push to hard assets.”
Despite several types of hard assets, from real estate to raw materials such as gold and oil, Novogratz boils his options down to cryptocurrency.
“I love Bitcoin. Next Tuesday we have the Bitcoin halving where the inflation rate gets cut in half. So you talk about inflation and fiat currencies where the Fed is printing money like it’s a money printing machine. And in the Bitcoin space, the money supply gets cut 50%.
Big deal there. We’re seeing lots of new investors in that space. Hedge funds that are buying it, not just individual managers. They’re buying it in their fund. I think you’ll see some announcements soon of that or investor letters coming out. And so all positive stuff in terms of flow in that space.
That’s where the bulk of my risk is. It’s been a fun environment in the Bitcoin space. After a long desert, we now really have real activity.”
For retail investors eyeing gold or Bitcoin, Novogratz says he believes the panic-selling cycle has quieted.
“I think Bitcoin and gold did suffer a pretty big risk-off in the original de-leveraging… Bitcoin went from $10,000 to $5,000, and gold had a pretty big retracement. I feel pretty good about those markets. I think the forced selling and a lot of the leverage left those markets.
Gold is simple. If you’re a retail investor you can buy an ETF, or if you have a futures account just buy gold futures. Bitcoin is a little trickier. If you’re a small investor, setting up a Coinbase account or any account – Gemini – or one of the exchanges makes sense.”
Novogratz says the huge gulf between the stock market, with rebounds incoming rather quickly since the market crash, and Main Street, where families are facing food lines and the worst unemployment rate since the Great Depression, is unprecedented. It’s equally difficult to reconcile massive economic pain for average Americans while the Fed approved the single biggest liquidity injection in history.
As for the coronavirus pandemic and the havoc it could continue to wreak, the outbreak has not dramatically tapered off.
The billionaire investor isn’t ruling out any sudden developments given Covid-19’s unknown trajectory.
“It’s really hard to paint a picture that the economy – in the next 18 months – gets even close to back to where it was. Things are going to take longer unless there’s some miracle cure or this virus just decides to run away, neither of which are high probability events.”
Since Federal Reserve Chairman Jerome Powell’s response to the crisis has been to use the full powers of the Fed to intervene with trillions of dollars to buy unlimited amounts of US government bonds and mortgage-backed securities, a response that has far outweighed measures undertaken by his predecessor, Ben Bernanke, during the global financial crisis of 2008-09, Novogratz doesn’t believe the stock market can crash again.
“I think it can grind down. I’d be short till maybe 2600 on the S&P, and then I’d probably take a long again. I think we’ve seen the lows of the year. I just don’t think there’s a great story for why things are going to rocket to the upside.”
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