Mike Novogratz Explains Why He’s Still All-In on Crypto

The former Goldman Sachs partner and hedge fund manager made and lost a fortune on Bitcoin. He’s undeterred by its drop.

No one on Wall Street embraced cryptocurrencies with as much gusto as legendary trader Mike Novogratz. After Jamie Dimon called Bitcoin a “fraud” in September 2017, Novo, as he’s known, predicted, correctly, it would hit $10,000 and keep climbing.

The former hedge fund manager and Goldman Sachs Group Inc. partner became an
unlikely hero of the crypto movement and a billionaire on paper. Emboldened, Novogratz announced he was starting a cryptocurrency merchant bank, Galaxy Digital Holdings Ltd. But as he was raising money for the firm in January, Bitcoin began its historic plunge. Galaxy has since reported $136 million in trading losses. Novogratz is undeterred.

You told me three months before Bitcoin peaked that crypto was going to be the biggest bubble of our lifetime. Did you think it was going to be the worst bear market in modern history?
It’s a fair question. We thought it was a bear market. I went into it thinking in the long run crypto is going to be a real structural shift in the world and I can just hedge my portfolio.

You start buying Ether again, because it’s only $400 after being at $1,300. But then it drops to $100, and you’ve lost 75 percent of your money. We haven’t done horribly in that context, but we’re still down.
After an entire career as a “macro” trader—betting on currencies, interest rates, economic policy—you became an early investor in Bitcoin. Why?
For me, crypto was interesting because what macro guys do is try to make complicated things simple. It was macro markets on steroids. I’d never seen something go parabolic on a log chart before. I thought, my God, this is the single craziest chart ever.

For a while, ICOs were the hottest corner of crypto. They also were a hotbed of fraud. Will they ever come back?
The ICO market is pretty much dead right now. There was a lot of fraud, and there was a lot of hype, and people lost money.

Should we think about crypto the way we think about commodities?
Yes and no. I do believe Bitcoin is going to be digital gold. That means it’s the only one of the coins out there that gets to be a legal pyramid scheme. Just like gold is.

Back when Bitcoin was on its way toward $20,000, there was a sense of inevitability about crypto. Is there still that sense?
That was a drug, and I don’t say that lightly. When you’re in the speculative mania, testosterone is boiling over and there’s a lot of greed. The audience is more sober now—the drug is gone. If anything we’re on the other side, at the stage where there’s the pessimism, and the fear, and the “Oh my God, it’s going to zero.” But it’s not going to zero. We’re at the methadone clinic.

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