Key Takeaways
- • Michael Novogratz, CEO of Galaxy Investment Partners, told the eMerge 2022 conference that DeFi "is going to win" over traditional finance once regulatory and KYC issues are resolved, arguing it settles atomically with no settlement risk.
- • Novogratz estimates 30% to 40% of global pension funds will begin participating in digital assets over the next five years, with the remainder following within 10 years, following Fidelity's announcement that it would allow bitcoin holdings in 401(k)s.
- • Bitcoin has failed to break above $50,000 year-to-date and has not retraced toward its November all-time high near $70,000, despite a trillion-dollar market cap.
- • Novogratz advises investors to hold some ethereum and bets in protocols where they have knowledge, and says he invests only where developer and user adoption volume is accelerating.
- • Novogratz expects global currencies to consolidate to a few major ones and stablecoins, while cautioning that forced adoption, as in El Salvador's bitcoin legal tender, runs against crypto's ethos.
Summary
Speaking at the recent eMerge 2022 conference, Michael Novogratz, CEO of Galaxy Investment Partners, argued that crypto will reshape the financial system. He framed bitcoin's 2009 origin as a response to the 2008 financial crisis and the breakdown of trust in centralized institutions, citing the war in Ukraine, US-China tensions, and declining public trust in politicians, social media, and elections. "As trust is in a bear market, what has been fascinating is blockchain, crypto, bitcoin is in a bull market," he said.
Despite that thesis, bitcoin has not performed as a hedge against inflation and uncertainty. According to the article, it has failed to break above $50,000 year-to-date and shows no sign of retracing toward its November all-time high near $70,000. Novogratz nonetheless expects bitcoin to decouple from risky tech stocks over time, noting it has grown from a 13-year-old experiment to a trillion-dollar market cap and outperformed the yuan, ruble, and lira.
Novogratz expects institutional adoption to broaden. He estimated 30% to 40% of global pension funds will participate within five years, with the remainder within 10 years. The article notes Fidelity became the first retirement-plan provider to announce plans to let investors hold bitcoin in 401(k)s. On DeFi, he said a large peer-to-peer network already trades billions of dollars across thousands of tokens, and that Wall Street's absence reflects regulatory and KYC barriers, which he expects to be solved.
The article also presents counterpoints. SEC Commissioner Caroline Crenshaw issued a statement in November citing retail transparency concerns from complex code and pseudonymity, and Chainalysis reported that 72% of 2021 crypto thefts, a record year for crypto crime, came from DeFi protocols. Novogratz made no promises on timing or which blockchain will lead, saying meaningful impact on daily life is at least a couple of years away. He expects layer-2 solutions and side chains to handle most transaction volume, and advised investors to hold some ethereum.
On currency, Novogratz predicted the roughly 164 national currencies would shrink to a few major ones, such as the dollar and euro, alongside stablecoins. He criticized El Salvador's bitcoin legal tender decision as contrary to crypto's permissionless ethos. He endorsed the stablecoin framework of Brian Brooks, former Acting Comptroller of the Currency, under which fiat-backed stablecoins should be backed by fiat instruments and redeemable at par, while noting algorithmic stablecoins such as Terra (LUNA) carry higher risk and higher yields that must be disclosed.
Despite that thesis, bitcoin has not performed as a hedge against inflation and uncertainty. According to the article, it has failed to break above $50,000 year-to-date and shows no sign of retracing toward its November all-time high near $70,000. Novogratz nonetheless expects bitcoin to decouple from risky tech stocks over time, noting it has grown from a 13-year-old experiment to a trillion-dollar market cap and outperformed the yuan, ruble, and lira.
Novogratz expects institutional adoption to broaden. He estimated 30% to 40% of global pension funds will participate within five years, with the remainder within 10 years. The article notes Fidelity became the first retirement-plan provider to announce plans to let investors hold bitcoin in 401(k)s. On DeFi, he said a large peer-to-peer network already trades billions of dollars across thousands of tokens, and that Wall Street's absence reflects regulatory and KYC barriers, which he expects to be solved.
The article also presents counterpoints. SEC Commissioner Caroline Crenshaw issued a statement in November citing retail transparency concerns from complex code and pseudonymity, and Chainalysis reported that 72% of 2021 crypto thefts, a record year for crypto crime, came from DeFi protocols. Novogratz made no promises on timing or which blockchain will lead, saying meaningful impact on daily life is at least a couple of years away. He expects layer-2 solutions and side chains to handle most transaction volume, and advised investors to hold some ethereum.
On currency, Novogratz predicted the roughly 164 national currencies would shrink to a few major ones, such as the dollar and euro, alongside stablecoins. He criticized El Salvador's bitcoin legal tender decision as contrary to crypto's permissionless ethos. He endorsed the stablecoin framework of Brian Brooks, former Acting Comptroller of the Currency, under which fiat-backed stablecoins should be backed by fiat instruments and redeemable at par, while noting algorithmic stablecoins such as Terra (LUNA) carry higher risk and higher yields that must be disclosed.
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