Mike Novogratz is the founder and CEO of Galaxy Digital. He was one of the early investors in cryptocurrencies. He recently appeared in a conversation with CNBC at the Financial Advisor Summit, discussing the future of cryptocurrency.
Speaking to the next generation of crypto evangelists !!! https://t.co/hLJNOXW4aL
— Mike Novogratz (@novogratz) May 23, 2024
Outlook for cryptos amid upcoming elections
He has initiated his conversation with the political views on cryptocurrencies as the presidential election candidate, Donald Trump, has been found endorsing cryptocurrencies in his multiple election campaigns.
Thus, Democrats, the opposition party, have also approved the ETFs on ETH. Therefore, cryptocurrencies have become a matter of election, which is why he expects positive updates for cryptocurrencies in the next few years.
He considers Bitcoin “digital gold,” as long as governments keep supporting it. The recent actions of the US government have increased trust in the sector.
What should be the level of investment?
He suggests an initial investment of 2-5% in cryptocurrencies. He advises all investment advisors to get off zero investments in cryptocurrencies. People who say they don’t understand cryptos or Bitcoin should start investing in cryptos.
To learn or understand any asset class, investors should put in some money in the asset class. The idea behind this strategy is that the fear of losing money keeps investors’ eyes on the sector through updates, interviews, and other modes of information. It eventually makes them comfortable with the asset class.
Generational Divide in Cryptocurrencies
The younger population prefers cryptos over gold as they understand the technology behind the development of digital currencies. In the view of Novogratz, the investments of the younger population are much more important, as they will be the ones who drive the investments and make them sustainable.
This generational divide is also confirmed in the results of the latest survey of the financial well-being of US citizens for 2023 revealed last week, where most of the crypto investments were coming from young adults rather than the grown-up segments.
Why Bitcoin over other coins?
Bitcoin is the boomer coin. Bitcoin is the most trusted coin among all the crypto tokens, so entrants prefer Bitcoin over any other cryptocurrencies. Still, soon after entering the market, people became interested in other tokens, including Ethereum, Solana, and other less popular ones.
After some time in the industry, people also start observing the potential in meme coins and altcoins, considering their lower current values.
CNBC took a survey among investment advisors, asking them if they recommend investing in Bitcoin or other cryptocurrencies for the coming financial year. The survey results showed that more than 60% of the advisors do not recommend investments in Bitcoin.
Despite these negative results, Mike Novogratz sees the potential and opportunity, as a large section of investors are yet to enter the market, but they eventually will, increasing the demand for cryptocurrencies in the future.
Moreover, cryptocurrencies have lowered the overall volatility of the portfolio, increasing the Sharpe ratio of the portfolio as it has a lower correlation with the traditional asset classes. Despite the higher left tail risk, it will not significantly impact the portfolio, as a minor investment in cryptocurrencies substantially increases the return potential.
On comparing the growth of mining companies and ETFs, he says that for companies and other direct digital currencies, derivative options are available to trade, and the younger population considers trading in options. Thus, Mike expects similar products to be developed for ETFs as well.
