money Mike Novogratz on Bitcoin’s recent rally
Mike Novogratz, founder and CEO of Galaxy Digital, joins Yahoo Finance Live to discuss Bitcoin’s recent price action, as well as his outlook on the crypto space.
Video Transcript
MYLES UDLAND: We talk a lot on this show about the stock market and increasingly in the last couple of weeks, we have paid more attention to what's happening over in the crypto market. Bitcoin now trading above 19,000, closing in on 20,000. The market cap is back at a record high. And joining us now to discuss all things crypto is Mike Novogratz. He is the founder and CEO of Galaxy Digital. Mike, it is great to have you on the show.
And you said just a couple minutes ago in your tweet kind of teasing this segment, it's been a quiet rally up to 19,170. What have you been thinking in the last couple of weeks? Why is this so much different than what we saw in 2017?
MIKE NOVOGRATZ: Listen, 2017 was a global speculative mania. And if you even look on, like, Google searches, we're nowhere near what 2017 looked like, right? It was driven by small retail investors. It was kind of the first people's revolution in lots of ways. It was the first global specula-mania we ever had. This rally is being driven by institutions slowly getting into this space-- high net worth individuals, hedge funds, real institutions. Bitcoin has become a macro asset-- a macro asset to hedge against the debasement of fiat currency both here in the US and abroad. And so that story has really taken hold.
Bitcoin's always been valued as a social construct very similar to gold. It's valuable, because we say it's valuable. And as more and more credible participants get in-- when Stan Druckenmiller says, I'm buying Bitcoin-- Stan Druckenmiller is kind of God in the macro space. If there was a God, it would be Stan. And so, you know, the credibility of the space just keeps growing.
And we've hit this kind of inflection point where the network effects take over. You know, because if you're probably a Yahoo Finance watcher, you know, a younger generation, Bitcoin is social money. And with PayPal and Square and, you know, all these apps where you can now buy and sell Bitcoin on it, it's just you're seeing the supply get sucked out. PayPal and Square alone are selling more Bitcoin than all the miners combined each day. And so there's just no supply.
JULIE HYMAN: Mike, it's interesting because you're talking about two different driving forces here. You're talking about institutions on the one hand and then you're talking about a younger generation on the other hand. Institutions aren't necessarily fickle, but the younger generation can be. So I wonder going forward, what the risk is of another crash in Bitcoin. Are some of the elements you're talking about-- will they insulate against the possibility of a crash? Or because it's a social construct, if people decide they don't want it anymore, couldn't it still have that kind of a dramatic decline?
MIKE NOVOGRATZ: You know, I think we're still going to have volatility in Bitcoin. It's not like you wave a magic wand and a 70 vol instrument goes to a 10 vol instrument. But the maturity process is happening. And institutions are longer hold periods, there are deeper pockets. And so we're seeing a transfer of coins from quicker hands, right?
Why Bitcoin had so much volatility in the past is that most of the liquidity came on these Asian exchanges-- exchanges like Huobi and BitMEX and Binance that offer 50, 80, 100 to 1 leverage. And so that was these leveraged buyers, almost gamblers, speculators that created a ton of liquidity. A lot of that stuff is being regulated away and a lot of it is being replaced-- a lot of that those coins are being replaced by more institutional hands. And so I think we'll still have volatility. It's going to be less.
BRIAN SOZZI: Mike, how much influence is PayPal having in this market? They're out there buying aggressively, they finally open up their platform to Bitcoin. How much influence are they having now? But also, how could their buying in 2021 send-- where do you think their buying in 2021 could impact Bitcoin pricing--
MIKE NOVOGRATZ: I think PayPal--
[INTERPOSING VOICES]
BRIAN SOZZI: --platform globally?
MIKE NOVOGRATZ: PayPal is having a huge influence. And it's having a huge influence in multiple ways. First of all, it was-- I said before, it was the shot heard around the world. Every single financial institution said, oh [MUTED], what are we doing? Every bank in New York and around the world said, what's our-- what's our crypto plan? What's our Bitcoin plan? And Paypal has got 330 million accounts. Now it's got 330 million wallets. Bank of America has zero wallets at this point.
Facebook is going to launch Novi relatively soon, with 2.3 billion wallets or some giant number. And so you're seeing this transfer of the financial services industry from bank accounts to wallets. And I think that was the unique moment of PayPal, where people said, uh-oh, we gotta get going. And so mark my words-- every single one of the banks from Goldman Sachs, Morgan Stanley within five years has a major presence in and around crypto.
JARED BLIKRE: Jared Blikre here. I happen to be a long term bull, but we've seen some incredible pullbacks-- greater than 90% many times over-- many times over the years. I'm just wondering in this maybe new normal where we have a lot more institutional support, do you still see potential pullbacks like that that are so painful to go through?
MIKE NOVOGRATZ: You know, I think we're going to have volatility. Right now, we're getting close to 20,000, like the old highs. Rarely does a market trade to the old highs and go right through it, right? It's just markets usually touch the old highs, exhaust themselves, correct a little bit, and then take out the high. And so there's big support around 14 and a half, 15,000. And so listen-- 19,000 to 15,000 would feel pretty painful if you just bought it here at 19.
I don't think we're going to get down below 12,000 again in this episode. Listen, if something dramatic changed-- if Janet Yellen came in and said, we're going to arrest anyone who touches a Bitcoin, you know, the regulatory risk is there. It's being diminished. And we're seeing regulators move the other direction from the OCC saying banks can have custody, you know, crypto.
All across the world, we're seeing this idea that the digitalization of money is happening. And so that architecture that you need for the Chinese stable coin or the US stable coin that will come out is the same architecture that Bitcoin and Ethereum, the rest of crypto trades on.
- You know, Mike, we started the conversation asking you why this is different than 2017. I'm curious what kind of conversations are like for you with your former colleagues in the hedge fund, the institutional space today versus what they may have been as recently as probably a year ago. I imagine things are different? Or maybe these folks have been more seriously interested than perhaps it would seem just based on the price the last couple of years?
MIKE NOVOGRATZ: You know, I think there has been a quiet group of people that have been focused on this that have bought in their personal accounts, but not in their institutions. And this is really the first year where people are like, OK, my hedge fund needs to be part of this, my asset management firm needs to be part of this. And so people are reaching out for advice. We're getting some, like, you know, thumbs up, nice job, happy for you, but how do I get involved?
The talent that's moving into the space is real. I think, you know, we just hired Damian Vanderbilt, who was a partner of Goldman Sachs for six years. And he's leaving Goldman Sachs to work at a crypto company. You know, four years ago, you weren't getting partners at Goldman Sachs leaving-- leaving their jobs to come here. And so I think you're going to see a lot of talent migrate into this space real quick.
