Big money com­ing to bit­coin, says Gal­axy chief Novo­gratz

Business World - - FRONT PAGE -

Mike Novo­gratz, the for­mer macro hedge fund man­ager at Fortress In­vest­ment Group who has joined the mad dash for crypto-cur­ren­cies, said on Mon­day that main­stream in­sti­tu­tional in­vestors are about six to eight months from adopt­ing bit­coin. Novo­gratz said he ex­pects ma­jor fi­nan­cial firms will soon start to of­fer bit­coin or sim­i­lar prod­ucts as an in­vest­ment op­tion, one that could be eas­ily pur­chased over the phone.

NEW YORK — Mike Novo­gratz, the for­mer macro hedge fund man­ager at Fortress In­vest­ment Group who has joined the mad dash for crypto-cur­ren­cies, said on Mon­day that main­stream in­sti­tu­tional in­vestors are about six to eight months from adopt­ing bit­coin.

Novo­gratz said he ex­pects ma­jor fi­nan­cial firms will soon start to of­fer bit­coin or sim­i­lar prod­ucts as an in­vest­ment op­tion, one that could be eas­ily pur­chased over the phone.

A turn­ing-point prod­uct from a big fi­nan­cial firm could ar­rive within six months, he said, though he de­clined to name a spe­cific com­pany.

“When it’s that easy, the price of bit­coin or ethereum is go­ing to go much higher. And that is a lot closer than peo­ple think,” said Novo­gratz, who spoke at the Reuters Global 2018 In­vest­ment Out­look Sum­mit in New York.

Novo­gratz is now chief ex­ec­u­tive of Gal­axy In­vest­ment Part­ners, a firm that bets on crypto-cur­ren­cies and re­lated busi­nesses.

“The in­sti­tu­tion­al­iza­tion of this space is com­ing. It’s com­ing pretty quick,” he said.

For the most part though, in­sti­tu­tional in­vestors have stayed away from bit­coin, the orig­i­nal and largest crypto-cur­rency in terms of mar­ket cap­i­tal­iza­tion, de­spite out­per­form­ing all the world’s tra­di­tional cur­ren­cies.

Tra­di­tional in­vestors still view bit­coin as opaque and highly spec­u­la­tive with po­ten­tial to col­lapse even though so far this year bit­coin has soared nearly 580%.

Bit­coin surged on Mon­day to $6,487, re­cov­er­ing more than $1,000 af­ter los­ing al­most a third of its value in less than four days as traders bought back into the volatile cryp­tocur­rency.

It hit a record peak last week just shy of $8,000.

Dur­ing the lat­est pull­back over the week­end though, Novo­gratz said he bought $ 15 mil­lion to $20 mil­lion worth of bit­coins.

Early en­thu­si­asts for the crypto-cur­rency were drawn to its rev­o­lu­tion­ary ideals of trans­parency and a lack of cen­tral or off icial con­trol. The risks of deal­ing in bit­coin were laid bare in 2013 when Tokyo-based ex­change Mt Gox col­lapsed af­ter ad­mit­ting it had lost the equiv­a­lent of hun­dreds of mil­lions of dol­lars of in­vestor funds.

The cur­rency’s ear­lier ties to gam­bling and crim­i­nal web­sites did not en­dear it to tra­di­tional in­vestors.

But bit­coin has since over­come some of those chal­lenges. “We’re past that,” he said.

BIG­GEST RE­GRET FOR 2017

Novo­gratz’s big­gest re­gret this year has been not buy­ing more crypto-cur­ren­cies, such as ethereum, when prices fell, be­cause he knew that they would keep go­ing up.

Ethereum is an­other pub­lic blockchain, es­sen­tially a shared data­base, sim­i­lar to that of bit­coin. Ethereum’s to­ken is called ether.

He felt that he made a psy­cho­log­i­cal mis­take, com­par­ing the orig­i­nal price he paid to ethereum’s value over the sum­mer. “When it was time to buy it back, I didn’t buy enough back,” he said.

He sees bit­coin, for in­stance, hit­ting $10,000 by March.

The for­mer Fortress ex­ec­u­tive re­cently cre­ated his own crypto-hedge fund, putting in about $100 mil­lion of his own money. He hopes to raise about $500 mil­lion, mak­ing it the largest fund of its kind.

Novo­gratz said Gal­axy’s largest in­vest­ment is in bit­coin. It has a “very big” hold­ing of ethereum and about 30-35 dif­fer­ent to­kens and com­pa­nies. He de­clined to give the per­cent­ages of each hold­ing, cit­ing com­pet­i­tive rea­sons.

One of those in­vest­ments is in the to­ken sale of World­wide As­set Ex­change, an on­line mar­ket­place for so-called “skins,” which are es­sen­tially vir­tual ac­ces­sories of video game char­ac­ters. The to­tal mar­ket for “skins” is $50 bil­lion.

The skins don’t have much ap­pli­ca­tion ex­cept to change how a char­ac­ter or a weapon looks.

He is also an in­vestor in Fun­Fair, a de­cen­tral­ized gam­ing plat­form.

FORTRESS EXIT

Novo­gratz, a for­mer Prince­ton Univer­sity wrestler, US Army he­li­copter pi­lot, and Gold­man Sachs Group part­ner, is best known as a swag­ger­ing “macro” in­vestor in the mold of Ge­orge Soros who made big wa­gers on global eco­nomic move­ments.

Novo­gratz worked at Fortress from 2002 to 2015, where he was a prin­ci­pal and ran its macro hedge funds. They grew to man­age bil­lions of dol­lars and made “Novo” a Wall Street star. But the funds were shut in 2015 fol­low­ing in­vest­ment losses. Novo­gratz re­tired from the firm.

“Very few peo­ple have grace­ful ex­its from Wall Street. Mine wasn’t as grace­ful as I would have liked,” he told Reuters.

Af­ter Fortress, Novo­gratz planned to fo­cus run­ning his own money and avoid the com­pli­ca­tions of ex­ter­nal in­vestors. But he fell in love with the prom­ise of blockchain tech­nol­ogy af­ter suc­cess­fully in­vest­ing in bit­coin, ethereum and other as­sets.

He has quickly be­come one of the most prom­i­nent ad­vo­cates of blockchain and has been work­ing to con­vince larger, more con­ser­va­tive as­set man­agers to get in­volved.

“It’s po­ten­tially wildly dis­rup­tive and rev­o­lu­tion­ary,” Novo­gratz said. •

MIKE NOVO­GRATZ said main­stream in­sti­tu­tional in­vestors are in­creas­ingly adopt­ing bit­coin.

Newspapers in English

Newspapers from Philippines

© PressReader. All rights reserved.