Despite its growing reputation as an uncorrelated hedge, Bitcoin advocate and Galaxy Digital CEO Mike Novogratz says Bitcoin remains linked with the movements of the macro economy.
The CEO, who accurately predicted that Bitcoin would cross $20,000 by the end of 2020, speaks with CNBC Squawkbox about Bitcoin’s correlation with the equities market.
When asked what he anticipates will happen if the current speculative bubble bursts, Novogratz says he fully expects Bitcoin to take a plunge with the rest of the equities market.
“If the speculative bubble bursts Bitcoin will go down for a while. There’s too much correlation between people with risk assets, right. If you made a ton of money here and you’re losing a ton of money here, at one point you’re going to take some profits where you’ve made money. And so if the S&P was down 20% in the next three days Bitcoin would be lower not higher.”
Despite this correlation, Novogratz believes that Bitcoin will mature into an asset that is less affected by significant dips in the equities market as a growing number of millenials and gen z’ers look to BTC as a hedge against economic uncertainty.
“There is an adoption cycle going on with institutions wanting to buy this because it’s really hard to see a way out for the central banks and for governments. It’s really hard to see a way out for this giant deficit that we continue to grow and it’s growing at an accelerating rate.
It’s why millennials and gen z intuitively are buying Bitcoin cause they know they’re kind of screwed. The baby boomers have eaten all their future lunches in lots of ways by building these giant deficits and so I do think Bitcoin is going to stay correlated to risk assets in the short run, but that correlation breaks down over time and it’s going to continue to go [down] as more people are getting into this community.”
Novogratz highlights the viral nature of Bitcoin’s story, attempting to prepare viewers for what he sees as an imminent onslaught of institutional interest Bitcoin.
“The viral nature of how many people are getting into bitcoin can’t be underestimated. It’s shocking to me how many institutions are now lining up to try and get Bitcoin into their portfolios.”
Don't Miss a Beat – Subscribe to get email alerts delivered directly to your inbox