Michael Novogratz has become such a believer in bitcoin that he left retirement  to helm Galaxy Investment Partners, a cryptoasset investment firm.

“Bitcoin was such a powerful story, it mixed a lot of things together: New technology called blockchain and new economic models founded upon the fact that we didn’t trust the system,” said Novogratz last week during a fireside chat hosted by Ric Edelman and the RIA Digital Assets Council at TD Ameritrade’s National LINC 2020 conference in Orlando.

Novogratz retired a billionaire from a hedge fund career at Fortress Investments in 2015 and joined Galaxy in 2017 – but his love affair with bitcoin had its roots in the global financial crisis of 2007 and 2008.

At the time, he viewed the development of digital currencies as a direct response to the erosion of trust caused by the crisis.

“I walked to a friend’s office, and they were plotting out this revolution in finance,” said Novogratz. “They were talking about how they were going to decentralize it, how this was more than just a speculative trade – it is a religion.”

Central banks responded to the crisis by cutting interest rates and engaging upon historic acquisitions of financial assets, which debased fiat currencies and created bubbles in the market, said Novogratz, which made cryptocurrencies appealing .

Bitcoin itself has experienced at least one bubble-like dramatic rise and fall, reaching its highest price at just under $20,000 in December 2017, only to drop to just over $3,200 in December 2018.

The rise was caused by a speculative frenzy, said Novogratz, and the fall was caused by rising regulatory scrutiny.

“We had this euphoria, and then it collapsed for good reason,” he said. “A lot of the projects were shit. You can’t have an unlimited supply response to the price going higher. There were so many new coins that the regulators realized that they had messed up, they tapped the breakers, and then there was a spectacular crash.”

Bitcoin subsequently stabilized and has gradually risen in price since December 2018, said Novogratz, who also noted that it is showing signs of being a safe haven for investors.

“I’m surprised by how well it’s done this year,” he said. “When we had the Iran news, gold ran up, but bitcoin also ran up. When the coronavirus news broke, gold ran up, but bitcoin also ran up. It’s behaving like ballast in your portfolio should. It’s uncorrelated.”

First « 1 2 » Next