Former macro hedge fund manager Mike Novogratz, now a prominent investor in cryptocurrencies, thinks bitcoin (BTC-USD) will go through a “Renaissance” soon.
Specifically, Novogratz expects the big institutional investor to get involved in the space. Naturally, the first place they’ll go is bitcoin before moving out to the other coins in the ecosystem.
The founder of crypto merchant bank Galaxy Digital, Novogratz worked on Wall Street for many years, including as a partner at Goldman Sachs and a partner at Fortress Investment Group where he ran the macro fund.
“We’re in this environment now where I see lots of institutional money getting ready to spend,” Novogratz said at Yahoo Finance’s All Markets Summit.
Earlier in the conversation, he predicted that this will start to happen in the “next two to three months.”
According to Novogratz, one of the main reasons institutions have stayed away has been the issue of custody solutions.
“If you’re at the state of Wisconsin and you’re a salaryman working on the investment portfolio, you might not risk your job for a company named Xapo,” Novogratz said, referring to the biggest custody player in the space. “Having ‘Goldman Sachs’ or ‘Bank of New York,’ getting the right names on your operational due diligence.”
One likely outcome is that there will be some deal activity in the space where established Wall Street names acquire some of the existing custody providers.
“The banks are going to experience institutional FOMO just like retail experienced it. We’re seeing it as we sit here. And they’re doing a ton of work because this is real. This is not tulips. We will have an internet 3.0. There will be a decentralized set of global supercomputers.”
A week ago, Novogratz called a bottom in crypto prices on Twitter.
This is the BGCI chart…I think we put in a low yesterday. retouched the highs of late last year and the point of acceleration that led to the massive rally/bubble… markets like to retrace to the breakout..we retraced the whole of the bubble. #callingabottom pic.twitter.com/EasTBYgjSj
— Michael Novogratz (@novogratz) September 13, 2018
The price of bitcoin peaked on December 19, 2017, at $19.140.70. It’s currently trading at around $6,700.
“I looked at the chart like I’ve done in most macro things. We’d had a major sell-off, some 85% in a lot of things. We have an index that’s called the Bloomberg Galaxy Crypto Index. The index went to where support should be, and there seemed to be almost a sellers’ exhaustion,” Novogratz said.
That said, he doesn’t expect prices to bounce straight back.
“This is going to be a grind back,” he said. “It’s established itself as the first digital asset with a store of value.”
He noted that bitcoin had held $6,000, which is a lot higher than it was a year ago at this time. Still, it’s well off those highs it touched in December 2017.
Novogratz described the market activity of 2017 as a “classic speculative retail mania.”
“What was neat about it was it was a global mania,” he said. “You’ve got the Koreans buying, the Chinese buying, and the Japanese, and Indians. It was the first speculative global mania ever, and it was all retail. It was the peoples’ revolution.”
According to Novogratz, prices came down for many reasons. Among those, prices got ahead of the growth in the ecosystem. Another reason is while the ecosystem started growing, money was needed to pay for salaries, insurance, computers, travel, and research. That money comes from capex and selling the coins raised in ICOs.
Novogratz expects that things will turn around when the herd of institutions arrives.
Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter. Send tips to firstname.lastname@example.org.