"Once you've struggled," Mike Novogratz quotes Dan Gable, "everything else in life is easy."
Wrestling defined the CEO of Galaxy Investment Partners at a young age, he says, laying the foundation for his success. "Wrestling teaches you to lose and come back."
The investor admits he "got lucky" becoming something he was "naturally good at."
Novogratz explains what made him successful as a macro investor on a recent episode of the 1000X podcast (Spotify / Apple). "It's a combination of reading economic trends, political trends, social trends, to understand how markets behave with those inputs."
“There is a lot of intuition in it,” he says.
The only silver lining
His intuition hasn't always hit the mark, he admits. “We thought that institutions were going to buy cryptocurrencies. I have 430 people at Galaxy standing by to help institutions buy cryptocurrency."
A combination of misbehavior in the crypto industry, strict regulation in the USAno regulation outside the US and high interest rates dampened institutional enthusiasm, he says.
“Now,” he says, “the only silver lining is that retail is still buying. It was always the people's revolution, and they are still out there."
Novogratz says he certainly hasn't lost faith in Bitcoin. The "great decentralized revolution" that is building a "whole new world" in networks like Ethereal it's still moving forward, he says, "but the market now seems to want to see shit that works."
“Unless you are an early adopter, you are not using Web3 in your normal life,” he says.
Novogratz says that to “get people in,” the crypto industry will need apps that people can “sink their teeth into.”
A strong prospect for the attractiveness of cryptocurrencies as a utility is authentication, he says. "With all these deep fakes," he says, "how do I validate that this is really my work?"
"But now I want to see people really show me the app that does it, and even if it's not fully adopted, then we're telling stories that people can sink their teeth into again."
There is no better inflation hedge in the world
It could take some time to return to a cryptocurrency bull market, Novogratz says. "We're not going to have a sustained bitcoin rally until the Fed says we're done and cutting," he says. And that, in my opinion, is probably [the] end of summer,” but it could take longer if stagflation sets in, he warns.
Pointing out that the US debt-to-GDP ratio exceeds 120%, Novogratz argues that the "only way out" of the situation is inflation. Last year, Novogratz says, the Federal Reserve did a "pretty good job" of inflating its debt outflow.
“We had seven percent inflation. We are paying three percent of our debt, two and a half percent. That was the combined average. So you just inflated four percent of the debt."
"Of course, you can't say that as a central banker, and you can't say that as a Treasury official," Novogratz says, "but you'll want to have higher inflation to get out of the debt trap."
“If it goes too high, you're screwed. And so it's a really challenging dance for managers of their economy to pull off."
Bitcoin and cryptocurrencies in general were the world's best inflation hedges during the Covid-19 pandemic, he says, when everyone was in a panic over rising costs. But when the anticipated higher prices finally showed up, Powell "took a sledgehammer in the gonads of inflation."
“That was painful. Crypto would have kept going up.”
Still, Novogratz looks promising amid the market tumult and "regulatory assault." He notes that retail "keeps accumulating" despite the noise.
“It amazes me,” he says, “how many purchases are made every day, in small amounts, that add up to large amounts.”
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