Podcast notes | Conversation with Galaxy founder Mike Novograt: What’s next for the crypto market?

Compiled & edited by: Xiaobai Navigation Coderworld

Moderator: Alex Thor, Head of Firmwide Research, Galaxy Digital

Guest: Mike Novogratz, Founder and CEO of Galaxy

Podcast source: Galaxy Brains

Where Crypto Goes Next with Mike Novogratz

Air Date: May 17, 2024

Summary of key points

In this issue Galaxy Brains On the show, Alex Thorn was joined by Galaxy founder and CEO Mike Novogratz to discuss the latest developments in the crypto market. Shortly after Galaxy's first quarter earnings call, the conversation delved into the performance of different divisions within Galaxy, including record achievements in mining and asset management. Mike shared his thoughts on broader market dynamics, including the impact of ETF approvals and his predictions for Bitcoin's trajectory in volatile market conditions. Alex and Mike brought a unique perspective to the intersection of finance, technology, and the regulatory environment that will shape the future of digital assets.

summary

• Alex He said that Bitcoin prices rebounded last week and inflation data was lower than expected, and the market responded positively.

• This interview talked about Galaxy's first quarter earnings,cryptocurrency, the popularity of Bitcoin and macroeconomics. It also touches on issues related to Japan and some political topics.

• Mike Galaxy said that the company performed well in the first quarter and achieved $400 million in revenue in the first quarter. In particular, the mining business achieved its best quarter in history, and the asset management and trading businesses also performed well.

• cryptocurrencyIts importance in American politics is growing and becoming impossible to ignore.

• Mike 表示尽管价格可能不会每个月或每季度都上涨，但他仍对未来12到24个月内更多机构参与加密货币领域充满信心。他认为比特币价格的下一次变动可能是上涨的，尤其是在接近选举时美联储可能会降息。

• Mike I believe that the cryptocurrency space is a narrative-driven industry that requires use cases and proof of concepts to drive development. In the past six to nine months, institutional investors’ confidence in the cryptocurrency industry has increased significantly with the approval of ETFs. The Bitcoin halving narrative has also had a positive impact on the market.

• Alex expressed the importance of cryptocurrency in American politics, especially its influence among voters in swing states.More than 30% of voters in swing states in the United States consider cryptocurrency a key issue. This is a result of the DCG andBlockchainThe results of the Harris Poll conducted by the association involved five swing states, including Ohio, Michigan, and Arizona. This shows that the issue of cryptocurrency has a wide range of concerns among voters, and there is no obvious partisan tendency between Republican and Democratic voters.

• Mike and Alex Both believe that in the current dollar-based world, the cryptocurrency market is somewhat similar to commodity industries such as oil companies, whose revenue and activity levels are also dependent on the price fluctuations of the underlying commodity.

The Fed prints money

• Mike Very concerned about national debt and fiscal policy. He said that the two main issues he is concerned about are cryptocurrency regulation and national debt. If the US government (whether Biden or Trump) can solve the federal budget deficit of 26% of GDP (should be 20%), it will be bad for Bitcoin. Therefore,Bad policymakers and profligate spending in Washington are actually good for Bitcoin.

  • The price of Bitcoin and gold are rising for the same reason - economic uncertainty. Bitcoin is rising faster because it is a new technology and a new commodity, and its adoption cycle is faster.

  • Although gold ETFs have seen net outflows this year, the spot price of gold is rising. Individuals bought $200 billion of gold, including companies like Costco.

• Mike Foreign central banks are buying gold at a record pace, especially China, partly because other countries are worried that the United States will freeze their dollar reserves due to sanctions imposed by the United States on Russia after the Ukraine war.

• Alex It is also believed that despite the net outflow of gold ETFs, the demand for physical gold remains strong. Individual investors and foreign central banks are buying gold in large quantities.

About the US dollar

• Alex It is believed that young people are more inclined to view Bitcoin rather than gold as a hedge against the US dollar. They value Bitcoin's growth potential more and Bitcoin's adoption is faster than gold, especially in times of economic uncertainty.

• Mike He said that although the US dollar is stronger than other currencies, it is now starting to weaken somewhat.There are coordination problems between fiscal and monetary policies in the United States, which has created a false stability in the fixed income market.Treasury Secretary Janet Yellen has been criticized as the worst Treasury secretary of her tenure because of her support for massive deficit spending without balancing cuts.

• Mike The yield curve and market stability. Yellen created the illusion of stability in the fixed income market through invisible yield curve control operations. Fed Chairman Powell, who worked with her, jointly maintained this artificial market stability. The release valve is reflected in the rise in gold and silver prices, which should also be beneficial to Bitcoin. In addition,Every stock market decline is an opportunity to buy stocks, because such a policy would result in a nominal growth rate higher than the inflation rate, thus concealing the debt expansion.

• Mike believes in long-term asset allocation.Under the current policy environment, hard assets such as stocks, real estate, Bitcoin, silver and gold will have long-term investment value.

Debt Problem

• Alex Point out the plight of middle-class and working-class Americans. Middle-class and working-class Americans are suffering financially because they do not have enough income to purchase assets such as real estate.

• Mike It is believed that if the conservative estimate of the Congressional Budget Office (CBO) is followed, the US debt-to-GDP ratio will reach 250% in 20 years, which is unsustainable. The next Treasury Secretary will face the most important challenge of solving the US deficit problem, otherwise the country will fall into a vicious cycle.

• Mike hopes that Bitcoin will become popular slowly but steadily.Rather than rising rapidly to a million dollars, because that would mean the collapse of society.

  • He pointed to the troubles in some countries, such as Nigeria and Turkey, due to irresponsible monetary and fiscal policies, as illustrating the instability in the global economy.

• Alex It is believed that if the debt problem cannot be controlled, the United States will face hyperinflation or other serious economic problems, leading to social collapse.

Trump's candidacy

• Mike It is a bad sign to think that if Trump is re-elected, he will plan to increase his control over the Federal Reserve. The complexity of Trump isHis personal ethics have caused social divisions, and his policies lack consistencyFor example, he may claim to deport 20 million immigrants, but in reality he may only deport 2 million. Such a policy could lead to rising inflation due to a lack of labor.

• Mike Pointing out that although Trump was not friendly to cryptocurrencies when he was in office, he now sees a political opportunity to use cryptocurrencies to fight against the Democrats. On the same day that Joe Biden said he would veto the SAB 121 bill, Trump announced his support for cryptocurrencies to attract supporters. Nevertheless,Cryptocurrency needs bipartisan support to grow in the United States.

Senators and Bill Influence

• Mike He believes that although cryptocurrency should be a bipartisan issue, it is currently in Washington due to the influence of lawmakers like Elizabeth Warren.Some members of the Democratic Party are opposed to cryptocurrencies.Warren wields enormous influence in the cryptocurrency space.

• He also pointed out the two sides of cryptocurrency, which is beneficial to liberals because it represents free choice, and to progressives because it can remove middlemen and achieve fairness.

• Mike mentioned SAB 121,This is an accounting rule that affects public companies, which must record cryptocurrencies on their balance sheets if they hold them. The rule affects banks more than crypto companies because it would greatly inflate banks' balance sheets. If the Democrats refuse to repeal SAB 121, it would be like saying they don't like cryptocurrencies, similar to how they don't like dogs, which is a serious mistake. There are a large number of single-issue voters in the United States who are interested in cryptocurrencies, especially young people, and if the Democrats continue to oppose cryptocurrencies, these voters may turn to support other parties.

Japanese Economy

• Mike We first discussed the economic situation in Japan.Japan is facing an aging population and low birth rate, and is a conservative country that does not welcome immigrants. They are the world's largest saver, and the economy has been in deflation for many years, and only recently has inflation appeared, which has made the economy active. Due to the high interest rates in the United States, Japan hopes that the Federal Reserve will cut interest rates to relieve pressure.

Bitcoin and ETFs

• Mike Pointing out that Bitcoin still outperforms in terms of risk-adjusted returns, second only to Nvidia and European stocks. Despite not going through the traditional "Bitcoin, Ethereum and Altcoin cycle", Bitcoin continues to attract investors because it is seen as digital gold and performs well in the current macro environment.

• He also pointed out new trends in the market.ETF The launch of and opening of wealth management channels have boosted Bitcoin adoption.Bitcoin as digital goldThe concept of Bitcoin has been deeply rooted in people's minds, and wealth management companies have begun to recommend Bitcoin to their clients. With the potential approval of ETFs, other crypto assets such as Ethereum are expected to gain greater recognition and investment in the market.

  • Imagine if the Bitcoin ETF was rejected on January 11, it would be very negative for the Bitcoin price because the market expected it to pass. However, the market generally believes that the Ethereum ETF will not be approved, so the risk is biased to the upside.

• Mike Think currentlyThe price of Bitcoin fluctuated between $73,000 and $57,000. The market volatility was low and many people sold call options.If there is good news, such as the Fed deciding to cut interest rates, Bitcoin price could break through $73,000,A parabolic riseThe increase in Bitcoin price requires less capital investment because the price is determined by margins.If future inflation data (CPI and PCE) and falling employment data, the Federal Reserve may cut interest rates in July, which will drive up the price of Bitcoin.

• Mike believes that most new ETF Buyers are not short-term speculators, they are buying Bitcoin for the first or second time, and usually do not sell Bitcoin within a week. Usually, there will be an options market one to two weeks after the launch of the ETF, but there is no options market for Bitcoin ETF yet, because of SEC restrictions. Once the options market is opened, it will attract a large number of retail investors, increase market activity and trading volume.

• Mike mentioned the volume for MicroStrategy and Marathon.MicroStrategy and Marathon have more trading volume than all Bitcoin ETFs, primarily because they have options markets that attract a large number of short-term and day traders.MicroStrategyMichael Saylor seized the market opportunity.The issuance of shares to purchase Bitcoin increases the volatility and trading volume of the company's shares. However, he has been selling shares every day in recent months, which may cause concern among investors, even though the market's trust in him remains strong. MicroStrategy's stock currently trades at a premium to Bitcoin, but this premium may not last. Over time, the premium may narrow or even turn negative.

SEC

• Mike There is dissatisfaction with the limited cryptocurrency investment opportunities in the United States, mainly because the SEC does not approve many cryptocurrency companies to go public. For example, companies such as Bullish and eToro are waiting for approval, but due to SEC restrictions, investment opportunities are very limited.

• Mike Mining companies and stock dilution were also mentioned. Many mining companies sell stock to buy equipment such as mining machines, and these company stocks trade at a premium to book value because they are seen as momentum stocks. Riot, CleanSpark, and Marathon CEOs have all cleverly used this premium to sell stock and buy more equipment.

• Mike Questions about SEC approval of Trump stocks such as Truth SocialXiaobai NavigationThese stocks have no real income but are highly valued. He believes that the SEC's actions are detrimental to retail investors.

• Mike He also discussed whether the meme stock phenomenon will exist for a long time. He believes that meme stocks have their own unique charm and skill requirements, and although they are speculative in nature, they may continue to exist.

Roaring Kitty and GameStop

• Mike Referring to the GameStop stock frenzy sparked by Roaring Kitty (Keith Gill) three years ago, he posted a picture from his basement, sparking a three-day frenzy that valued GameStop at $17 billion.Mike Appreciate Roaring Kitty's performance in the GameStop stock incident, believing that he beat the system.

• Mike Mentioning the movie Dumb Money, which reflects the events of the GameStop stock frenzy, shows its realistic representation and entertainment of the events.

• Mike There are concerns that many people have lost money after buying GameStop shares at high prices, although early buyers may have made profits.

• Mike It’s a form of financial nihilism to argue that low interest rates and massive government handouts have fueled the rise of cryptocurrencies and meme stocks.

• Mike strongly criticized the current government's exploitation of the younger generation.Citing Scott Galloway's Ted Talk, he pointed out the plight of young people in terms of income, education and housing costs, and that young people are angry about the status quo.

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