One of the smartest minds in the cryptocurrency industry is billionaire Mike Novogratz, CEO of a cryptocurrency investment company. Galaxy Digital Holdings (TSX:GLXY). As a former hedge fund manager and partner at Goldman Sachs Group (NYSE: GS)Novogratz has a special talent for bringing insights from Wall Street and traditional finance to the Wild West world of cryptocurrencies.
And right now, Novogratz is extremely optimistic bitcoin (CRYPT: BTC), which he believes could skyrocket in the coming years. This is based on two fundamental ideas about how traditional financial markets work. Let's take a closer look.
The Bitcoin Spot ETF
According to Novogratz, the SEC's approval of a spot Bitcoin ETF investment product will be huge for Bitcoin's future prospects. In fact, in late December, he told CNBC that he thought bitcoin it could eventually go parabolic.
If institutional investors and wealth managers decide to allocate just a small percentage (even as little as 1%) of their assets under management to cryptocurrencies, that could significantly increase the price of Bitcoin. It's really just basic supply and demand. Bitcoin has a lifetime supply limited to 21 million coins, so an influx of new demand from Wall Street will likely have a huge impact. In fact, Novogratz says, there could be a "supply crisis," and that's when Bitcoin could go truly parabolic.
Of course, it remains to be seen whether the impact of the new Bitcoin spot ETFs will be as big as some people think. For example, some investors think that there will simply be a reshuffling of Current financial instruments related to Bitcoin (such as futures-based Bitcoin ETFs) and in the new spot Bitcoin ETFs. If that is the case, then Bitcoin's future upside potential could be more limited.
Bitcoin versus the US economy
And then there is the issue of the American economy, which is saddled with a huge debt load and annual budget deficits that seem to grow with each passing year. Over the winter holidays, one of the big economic stories was the rise of the US national debt to an all-time high of $34 trillion. On top of that, there is a risk that the Federal Reserve will not be able to achieve a "soft landing" for the US economy. If that is the case, then slow growth and high inflation could become a reality for the foreseeable future.
That's terrible news for the US economy, of course, but it could be positive for cryptocurrencies, Novogratz says. This is because Bitcoin and other cryptocurrencies were originally created as an alternative to the fiat currency system. In fact, written in the first block of the Bitcoin blockchain is a cryptic message about relying too much on the traditional financial system: "The Times 03/Jan/2009 Chancellor on verge of second bailout for banks." (The message referred to a newspaper article about the British government's failure to stimulate the economy during the 2007-08 financial crisis.)
From this perspective, the current state of the American economy is, in many ways, a vindication of the ideas of the original Bitcoin pioneers. So, while it may seem counterintuitive at first, what's bad for the U.S. economy could actually be good for cryptocurrencies. From a broader perspective, that narrative could lead investors to move their money from fiat to cryptocurrencies. They will trust the US dollar less and trust Bitcoin more. That's essentially the message Novogratz told CNBC listeners back in December, so this is a narrative that's obviously gaining a lot more traction than you might think.
Before betting everything on Bitcoin
Just keep in mind that billionaire Mike Novogratz runs a cryptocurrency investment company and that a substantial portion of his net worth is invested in cryptocurrencies. So he's obviously going to have a bullish view on Bitcoin. Before you decide to bet on Bitcoin, you need to decide for yourself whether his arguments make sense.
As for me, he had me on โBitcoin ETF.โ I am long-term bullish on Bitcoin. While Bitcoin may not go parabolic, it seems very likely right now that Bitcoin could soon test its all-time high of nearly $68,000 in November 2021. For me, the question is not whether or not to invest in Bitcoin, but more well, how Much of my portfolio should be allocated to Bitcoin.
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Dominic Basulto has positions in Bitcoin. The Motley Fool holds and recommends Bitcoin and Goldman Sachs Group. The Motley Fool has a disclosure policy.
1 cryptocurrency to buy before it skyrockets, according to this billionaire was originally published by The Motley Fool
