November 5, 2019 / 11:17 PM / 16 days ago

After crash, Novogratz tempers expectations but still backs crypto

NEW YORK (Reuters) - Cryptocurrency investor Mike Novogratz has tempered his expectations after prices crashed last year, but he says he remains a long-term supporter of the sector.

Mike Novogratz, Galaxy Digital founder, speaks during a Reuters investment summit in New York City, U.S., November 5, 2019. REUTERS/Lucas Jackson

“I think ambitions have been tempered a little bit by reality,” said Novogratz, who spoke at the Reuters Global Investment Outlook 2020 Summit in New York on Tuesday.

He is chief executive officer of Galaxy Digital, which invests in cryptocurrency and blockchain projects. Novogratz previously ran a macro fund at Fortress Investment Group.

“I think the timing is going to take longer than people had hoped,” he said of the pace of blockchain projects. “But it’s going to happen.”

Blockchain, which first emerged as the system powering the digital currency bitcoin, is a shared database maintained by a network of computers.

Initial coin offerings were blockbusters, with more than $6 billion in funding raised in 2017. But after hitting a market peak of more than $800 billion in early 2018, cryptocurrencies dived and wiped out about 85 percent of their total market value.

Hurt by last year’s collapse in cryptocurrency prices, Novogratz said he was probably “too greedy” as the firm embraced hedging strategies that did not fully protect investors.

Still, Novogratz said he expects cryptocurrencies will play a growing role, as shown by Facebook Inc’s (FB.O) planned Libra coin and other efforts to integrate distributed-ledger-based technologies into routine financial services.

Libra is intended to be a digital currency backed by a reserve of real-world assets, including bank deposits and short-term government securities, and held by a network of custodians.

The plans have attracted intense scrutiny from regulators concerned about its impact on the financial system, user privacy and its potential for use in money laundering. A number of corporate supporters such as Visa Inc and PayPal Holdings Inc have withdrawn their support for Libra.

Novogratz said Facebook made a mistake when it described Libra as a global currency, instead of a global payment tool.

He also noted how bitcoin jumped in value in response to a message from Chinese President Xi Jinping to embrace blockchain technology, saying the country needs to take advantage of the opportunities the technology provides. Bitcoin surged following Xi’s remarks.

    “He just credentialized crypto and blockchain,” Novogratz said.

Novogratz was once based in Hong Kong and said he recently returned to the city to march as an observer with protesters objecting to China’s efforts to exert more control over the city.

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He said he was struck both by the restraint of the city’s police, and by how protesters seemed more concerned with opposing stricter social controls than with practical issues like the high cost of housing.

Their overall message, he said, was that ‘We don’t want to be part of that authoritarian regime.’”

(For other news from the Global Investment Outlook 2019 Summit, click here)

Reporting by Gertrude Chavez-Dreyfuss and Ross Kerber; Editing by Dan Grebler

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