Galaxy Digital CEO Mike Novogratz: ‘Crypto Revolution Is Here’
I had a chance to speak to them about investing in crypto assets and getting institutional investors involved. Uh company earnings at galaxy, as well as novogratzs outlook on bitcoin, have a listen start off with the sixty four thousand dollar question. Yeah, like this is listen predicting markets is always difficult, uh. What i would tell you is, in the last few months, weve seen an unbelievable mindset, shift where people thought about crypto as just bitcoin. Until a few months ago, uh bitcoin has a great asset to protect against the debasement of fiat currency. Right weve got profligate spending by central banks and finance ministries all over the world, and so people are buying bitcoin as an inflation, hedge, the rest of crypto. They didnt really understand so well and now. I think the whole world understands that web 3 right the internet of value exchange is a real thing and its coming and so youve seen this huge shift in some of the other coins. I think collectively its a big stamp that says hey this crypto revolution is real its here for good its an institutional asset class and moneys going to keep going in and so listen to your price target, so bitcoins 45. 000. I think it could finish the year over the all time highs at 60. uh, and i think you know in three to four years. It could be five hundred thousand okay, that 500 000 gets it to around, where gold is exactly but and while at the same time there are folks who are buying the dip.
Michael saylor has been scooping up more bitcoin, putting them into his reserves on microstrategy uh. Do you have any update on bitcoin reserves at galaxy digital well? Were a public company well put our earnings out, you know. After the third quarter uh we have bitcoins ethereum lots of other coins. We have lots of venture investments on our balance sheet. We have mining, and so weve got a big balance sheet. Are you buying in this quarter were buying non? Stop, but not i shouldnt say not stop, but were always buying right were were taking, profits were reinvesting, and so we always playing car abc, abc Laughter. Speaking of which you have a partnership with andrew and maybe – and you can explain what that entails, sure were an alternative investment platform case and weve partnered with mike and with galaxy for distribution. So we help the independent channel get access to great funds. Also, my focus is on giving people a little bit of the confidence that mike has so helping advisors speak with confidence and conviction about alts is a re education process and thats. What my focus is weve partnered a lot on creating great content for the market to help educate them. They can start by wearing good jackets. Obviously, right, i could see all these advisors wearing yeah well start a fashion revolution for financial advisors, and what was interesting was i i saw that part of this is that there needs to be a re education of the chartered financial analyst uh, traditional finance, education or The ira iria education yeah, i think so i think so.
I think i think look crypto in a way is like the alternative, alternative investment and i think for it to really go mainstream, especially in wealth management with traditional advisors. We need a modern new approach to education and its not just about dissemination of information, its about helping people acquire usable knowledge and thats whats really key, and we can use technology to do that. Fortunately, the technology exists – and this is a great moment in time to do that. Okay, so in your conversations with the hedge funds, the institutional investors here at this conference, how are those conversations going? Are they warming up to crypto? Are they or what there is theres? A gigantic institutional awakening that you cant miss web 3.0, you cant, miss the next internet, and so every single investor i speak to from pension funds to hedge funds, to family offices, realize theres an urgency to understand whats happening. They need ships on the board and so youre. Seeing lots of money pour into any any crypto venture fund. Thats being raised is raising lots of money right now, because people are short, this asset class. What products are you advising for exposure? Listen! I we love when people buy our stock, because galaxy stock is a proxy for the whole crypto space right. We have venture, we have businesses uh, we have bitcoin and ethereum, and you know luna and solana and all the other what we think are important: ecosystem coins.
Um we love people putting money in venture. We just raised a 325 million dollar venture fund, specifically uh, targeting the metaverse right, the digital world right, which is collapsing or colliding with crypto at an accelerating pace and so uh. I havent been more excited about the opportunity set and i think you know my excitement. My energy uh is coming from the fact that everyone i talk to wants to get in the space. Are there certain coins on your uh radar here were seeing solana, skyrocket, algorithm yeah, so i know youre, not a fan of cardano. Well, there are two things that are happening at the same time um. This idea that web 3., like what does web3 mean web3, means that you can use this blockchain based base layer of trust. Everyone thinks its probably going to be ethereum, but ethereum is still slow, its slow, because its really decentralized and so uh ecosystems, like solana, which are ethereum competitors, are far less decentralized right, but much much faster and so like in the nfl. Speed kills right, speed, wins, uh and it right now, theres lots of people saying hey ill, give up some safety and security and decentralization to get my product working faster. This isnt going to be a debate that goes on for long periods of time, and so the platforms where lots of developers are working where theres great user activity uh were investing in those theres. A second story going on thats fascinating to me and its that thats people using crypto are using new assets as identity and paying for identity.
I would say: cardano is an identity token right that its not used by a lot of people, none of the developers that we talk to are building on it uh. None of the funds i know, are investing in it, but its got a gigantic market cap and its got a very passionate community of people that almost wear it on their sleeve and its. The same thing were seeing with gamestop in amc and, quite frankly, anti vaxxers uh. This is identity its not that they really care about the vaccine as much its their identity and weve now, monetized identity and its fascinating, because theres a resilience to that. I didnt im shocked how long game stocks kept up its. You know its valuation. The valuation makes no sense to any equity investor all time, but as an identity, token or identity stock, its making sense and so theyre kind of two separate stories going. At the same time, which i find fascinating, its a certainly a millennial, uh phenomenon but andrew when youre looking at our our rias, what kind of allocations are you uh recommending in the to get exposure into crypto, and i dont think they? You know older generations care about identity so much well, they should okay um actually, but i dont make recommendations so and were agnostic to that allocations, even even allocations. What were what were really focused on is empowering advisors to have that knowledge to be able to make an informed decision for their client, and so you know you listen to mike speak about all this and, like the first principle, is sort of understanding a bit about How the blockchain works – and i think that people dont really appreciate that at scale, and so our thing is about.
How do we drive that sort of factual information in a way that people can really understand it, and then they can listen to people like mike and other experts in the field and figure out? What are the right allocations for their clients based upon their own risk? Tolerance and their views of the future, so one thing thats absolutely super crystal clear to me is zero – is not the right allocation, and so every single investor has to get off zero because its just not the right allocation right. The total crypto market cap is about two and a half trillion dollars. I think global wealth is 450 billion or probably higher trillion, probably higher. So crypto market cap is still less than a half. A percent of global wealth like youd, be crazy. Looking around the world, you dont have to be a great prognosticator, not to think that thats significantly higher in a few years that or something really wackos happened, and so youve got to get off zero and if theres one message, i want to get people its like Get involved start by buying bitcoin ethereum, if you want to, you, know, buy our stock, listen to your your your financial advisor, but you know once youre in you start paying attention yeah thats the way the the brain works. So speaking of a galaxy in the first quarter, uh 860 million net profit. Second quarter: 176 million net loss any preview to the third quarter.
Listen, you know if you, if you look at the prices of a basket of coins uh our profitability is still somewhat correlated to how the markets doing and the markets had a pretty great third quarter, and so you would guess that our third quarter is a lot Better than our second quarter uh, without giving any like you know, hidden inside information, so the activities weve seen in every one of our businesses are awesome. Um and i cant imagine that doesnt continue into the fourth quarter uh. There is so much momentum in the space right now um. Maybe some comment on the etfs and the volumes youve been seeing there. Etf volumes are picking up. You know we dont have a u.s etf. Yet uh. Do you see that i think youll get one in either the fourth quarter of the first quarter? Again, i dont know it grant grand insight. You know where weve applied or were in the queue, but are you in talks with regulators um? We talk with regulators a bunch either directly or into or through industry association groups. I think theres a gigantic opportunity for the crypto community to educate regulators to work with regulators to work with politicians. We were. We felt shy in that in the last five years. Right politicians are literally at in first grade right now, coinbase ceo, brian armstrong would disagree. He would say that they theyve been trying to speak to uh regulators, specifically the scc and theyve been having trouble in that regard.
I i read brians comments and i thought they were fascinating uh when i was saying this broadly, i was saying the crypto community didnt do a good enough job, educating dc, and so politicians are making decisions on things they have no idea about that are really important And so we need to double our efforts and we are a galaxy talking to people in dc, making sure they understand whats at stake, that this is a technology play that this is not crazy speculation. I mean it drives me freaking, crazy, that elizabeth warren whos, a very bright woman, is constantly out bashing crypto when crypto is a progressive movement at its core uh shes in the stable and its a technology and its a technology movement, we are building a base layer Of trust for the next generation of the internet, the internet, a value, transfer and youd be crazy as a politician crazy, as a regulator not to want that to have a lot of u.s footing right, yeah, just the correct she shes into new uh central bank digital Currencies rather uh, so government runs stable coins, but nevertheless there are jurisdictions other countries that want to be much more friendly, uh regulatory, wise, such as el salvador, which also recently uh one of the advisors to the president mentioned that he doesnt want to tax uh, crypto Profits – and you know there are more inviting jurisdictions met with that. Do you think that will prove to be very competitive against the united states? The u.
s europe have giant economies, big regulatory regimes we got ta have to get them right. This is where it needs to get be done right or the whole space is going to slow down. Listen, there are places like bermuda that are really crypto forged singapores really crypto forward and lots of companies will set up there and innovation will happen there. But if we dont get the regulation right in the u.s and in europe uh this whole movements going to be much much slower. That being said, what do you think about? You know the bitcoin law in el salvador? Ukraine listen, i think its fascinating. I, like bitcoin glitches, bitcoin bitcoiners, are split like one of the things that a lot of bitcoin, as i said, is progressive on one side. Its libertarian, on the other. A lot want freedom, and so to be told you have to accept, is is kind of counterintuitive to bitcoin um, but listen. El salvador is a dollarized economy. 20 of their gdp is from remittances right from el salvadorians working overseas. Setting money back right. Now it cost a shitload to send money back from any country to a home country and bitcoin and other crypto ecosystems make that really really cheap. When i was a kid, it used to cost three dollars to call germany now its free. The same thing is going to happen with uh transfer of money around the world, uh transfer of value thats, the genius of uh, the blockchain and finally, ive got a rap.
But just my favorite question is: do you think that bitcoin could eventually be the reserve currency of the world theres a shot? Listen, i dont in some ways want it to be, which is counterintuitive right. Ive spent my whole life in bitcoin. In that, i would love the u.s policy makers to do such a good job, that they rebuild confidence in the dollar, right that the deficits go from 14 back to zero were at a surplus that our tax base grows. Uh that we put ourselves on stable footing that doesnt look that possible, so people are buying bitcoin as a hedge against that, as a as most bet is that were going to have a slow, uh depreciation of the dollar. Not not venezuela, not nigeria, but were gon na, have a debasement of four five six percent a year and all of a sudden after four years, like ive, lost 20 percent of my value, and so i own a lot of bitcoin, because my base case is its Going to be really hard for u.s policymakers to to get it right to land the plane right, we have a social division in our country, so youve got democrats now wanting to spend lots of money because we have a rich poor gap thats a mile wide. We have very little fiscal profits and we have so much debt that it seems. The only way out of this is to monetize it and thats the most likely path and thats.
Why you want to own hard assets like bitcoin? I dont want us to become venezuela like well, have breakdown of civil society? Well, have wars well have death, and so, if i had my wishes, you know yelling and pal would be magical and the economy would grow and rates would normalize and bitcoin would be less important.