Billionaire Mike Novogratz Explains When We’ll “See a Big, Big Rally in Crypto”

On Tuesday (September 20), billionaire investor Mike Novogratz was asked to share his thoughts on the crypto market.

Former hedge fund manager Novogratz is the founder and CEO of Galaxy Digital, “a technology-driven financial services and investment management company that provides institutions and direct clients with a comprehensive suite of financial solutions spanning the ecosystem of digital assets”.

Novogratz’s comments were made during an interview with Andrew Ross Sorkin on CNBC’s “Squawk Box.”

According to a report from Daily Hodl, Novogratz had this to say about Ethereum and Bitcoin:

Ethereum has seen quite a significant drop. We had the merger. The merger was an incredible achievement in many ways, wasn’t it? This shows that a decentralized community can accomplish something really complicated. And so I think we’re going to look at that as something really important. You know, Ethereum had gone from $1,000 to $2,000. And so now you’ve had a very big setback. It looks like $1250 should be the low here so I think you are closer to the bottom than the top...

There’s a bitcoin somewhere because you see these institutions slowly engaging. And so when I see this adoption when I see BlackRock making a deal with Coinbase and their own fund… you just know people are coming to buy and so, you know, could Bitcoin go down? Of course it is possible but I don’t think there is a catastrophic fall...

You would be more neutral here and wait to see the Fed pivot. And then I think you’re going to see a big, big rally in crypto.

Yesterday, at the press conference following the two-day FOMC meeting, the Fed announced that it was raising the federal funds rate by 0.75%, and Fed Chairman Jerome Powell said this during the press conference:

My colleagues and I are firmly committed to bringing inflation back to our 2% target…At today’s meeting, the Committee raised the target range for the federal funds rate by 3/4 percentage point, bringing the target range at 3 to 3-1/4%… As shown by the SEP, the median projection of the appropriate level for the fed funds rate is 4.4% at the end of this year, or 1 percentage point higher than expected in June. The median projection rises to 4.6% at the end of next year and declines to 2.9% by the end of 2025, still above the median estimate of its longer-term value.

On June 16, after the previous 0.75% interest rate hike by the Fed, Novogratz spoke about the crypto market during an interview on Bloomberg TV’s “Bloomberg Markets: The Close,” where he spoke to Sonali Basak, Caroline Hyde, Romaine Bostick and Taylor Riggs.

Novogratz said:

You have to hold the crypto in the context of what happened on the macro…there would be headwinds this year because the Fed was going to have to pull cash, and therefore assets that went up against the money cheap forever – whether it’s growth stocks, or expensive watches, or crypto – have certainly been under pressure throughout the year.

What exacerbated this move in crypto was a bunch of leveraged players that had a lot more leverage than I think people thought… And so you’re talking about Celsius or Three Arrows Capital…this caused almost something similar to what happened in 1998 with Long Term Capital Management…Presumed market neutral players with monster leverage unfolding and created a ton of fear in the space. And so you see a lot of credits taken out of space, and when the credits are taken out, you’ve seen prices crash…

I watch the US stock market. Looks like there’s probably another 4% to hit 3500, where the 200 week moving average is, where support comes in, and I think you’re seeing this risk sell-off and the cryptos have caught up .

I guess leverage was taken out of the system, but Humpty Dumpty doesn’t get back up right away. It takes some time to sort it out. There will be bankruptcy proceedings in many companies, and so I think we should bounce on $20,000 [for $BTC] and bounce off $1,000 [for $ETH]it will take some time for the crypto to find the story, regain confidence…

I 100% think there are people on the sidelines waiting to build, but I think the first buyers in the traditional sense will be global macro hedge funds. By the time the Fed flinches and says “we’ve raised enough, we can’t do it anymore”, I think you’ll see a lot of traditional macro funds that have had a great year buying Bitcoin. We will add to our position at that time…

Guys who have been doing this for a long time realize that soft landing is impossible. And so, the economy will go into recession. It’s going to go into recession quickly… You’re going to see the economy come to a screeching halt. That’s what the Fed needs to do to bring inflation down. And so, we are going through this delicate period where growth will recover and inflation will still remain tenacious before rolling. When the Fed sees it rolling and signals the break, you will see the crypto take off. You will see other assets follow.

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