the money game

A Bitcoin Billionaire on When to Sell vs. HODL and Dogecoin ‘Nihilism’

Novogratz is bullish. Photo: Getty Images for Friends of Hudson River Park

Mike Novogratz, once a partner at Goldman Sachs who went on to be a hedge fund manager at Fortress Investment Group, has found his biggest financial success in cryptocurrency. Now the billionaire founder and CEO of Galaxy Digital, Novogratz is building his own crypto-focused financial empire and has just sealed a deal to buy digital currency trading platform BitGo for $1.2 billion, the first billion-dollar merger in crypto. During a virtual interview at the Ethereal Summit Friday – a few days prior to Elon Musk’s announcement that he was suspending Bitcoin payments for Teslas over energy-use concerns – Novogratz discussed his perspective on the technology, how he ended up with 85 percent of his net worth in crypto, and why he keeps losing out on NFT auctions. The conversation has been edited for length and clarity.
Your company, Galaxy Digital, just acquired BitGo for $1.2 billion. It was the biggest deal so far in the industry. Are you looking at more billion dollar deals? Do you have that kind of dry powder?
I do think bigger is better going forward for a bunch of different reasons. Something really cool for us crypto nerds happened in the last six months, like we went from hoping to be an asset class to being an institutional asset class like that. That means that if you’re not long, you’re short. So every institution we speak to — whether it’s a corporate, financial or tech institution — are trying to find their way into the space.

People think, well, what’s the total addressable market of our space? Who the heck knows? It’s growing so fast. We’re making money in places we didn’t think we were gonna make money in, and I’m sure next year trying to predict my earnings is gonna be really hard. We didn’t have an NFT business nine months ago, because almost no one did. But all of a sudden now, NFTs are in inning one of a nine-inning game.
Something else that’s changed this year is that Coinbase went public, which is a huge change on Wall Street, and Galaxy itself is planning an IPO later this year. How does that change things from your perspective, and what do you say to people who are concerned about seeing crypto go Wall Street?
I spent my last six years literally trying to convince people that this revolution was worthwhile, because it was going to help us rebuild the financial infrastructure of our country to make it more transparent, more egalitarian, more fair, more efficient. We have a capitalism that’s broken. I don’t want to replace capitalism with socialism. We need to fix capitalism, because right now, it’s not working for a ton of people. When people ask me about Dogecoin, or GameStop, this is a young generation screaming out and basically given the middle finger to the system, and saying, Hey, screw you guys. There’s a nihilism almost to it.

And so I’ve been trying to focus on the constructive side of that revolution. This is more than just a financial game. This is a revolution. And so I think the more people we can bring in the tent, the better. There are lots of investors whose first exposure to our space is going to be through public equities. That’s what they’re used to. That’s what they’re comfortable with. I think, to be in this business, you’ve got to be willing to eat your arm, and then grow a new one. Cut your foot off and grow a new one, right? Because you’re not going to go from where we were to where we could go overnight.

But we’re a long way from, I think, a decentralized world. And the question I have, and it’s a real question — it’s not a statement — is, will the consumer care? Right? It’s the back of the TV to the consumer. So does he even know the difference? And if consumers trust us, well, what’s the big deal? Until one day we get really drunk and decide to play funny tricks on ’em? You’ve got a lot of blockchains that I call BINOs — blockchains in name only. A blockchain is not a blockchain is not a blockchain. They’re not all the same. And I don’t think the consumer or the investor has put a lot of thought into that.

You’ve predicted before that bitcoin will hit $100,000 by the end of the year. You also predicted in January that ether would reach $2,600 in January, and we’ve already blown way past that — it’s lately been trading around $4,000. So are you revising your projection for ether?

You know, hats off to all the ether-heads out there. I think we saw something really awesome in the last few months. And it was a confluence of kind of three tailwinds all at the same time. We already had payments and stable coins that really kind of gave ether the kick last year. But then all of a sudden, you have decentralized finance and NFTs both on Ethereum at the same time roughly, with wild accelerating growth. And you start believing, hey, this will be the supercomputer that authenticates all this stuff that’s happening. Listen, all markets correct; almost 100 percent certainty it will happen — it’s just the math. But it’s pretty staggering. And listen, ether looks likely to go a lot higher now.

How much higher, do you think?
You know, it’s dangerous to give predictions on the highs. But could it get to $5,000? Of course it could.
I remember talking to you at the end of 2017 and you were saying about 30 percent of your net worth was in bitcoin, ether, and some other cryptos. What are you at now? How are you thinking about your portfolio and the role of these things in it?

Like anybody in crypto, the last five months have kind of rocked our worlds in terms of what percentage of our net worth is in crypto. And I think I’m up to 85 percent in crypto. I have lots of other investments that I love: the mushroom company that I’ve been involved in, and Bojangles, the chicken company. It’s just that cryptos had a move that is a once-in-a-generation move. And I think people should understand that it’s not going to keep happening over and over. Like this idea that we’ve gone from not-an-asset-class to an asset class only can happen once.

But this wild acceleration that we’re seeing, where things are up 30 times, 40 times, 100 times, that’s not normal. It doesn’t happen very often. People in the space should kiss their boyfriend or kiss their girlfriend and give each other a hug, because it’s fun to have been in the space when this stuff happens. Be prudent, take some chips and buy yourself a house if you can afford it, or a car, or at least at least a nice new jacket. You know, take some of those profits and put them into some joyful things.
Does that mean you’re selling a little bit now, or buying or hodling?
Well, listen, I’m lucky enough that I had wealth outside of crypto wealth. I’m as bullish as I’ve been on the space. But I see lots of people that have gone from one lifestyle to having the possibility of really having changed their life. And I’m like, Guys, be prudent, take a little bit off the table.

We were talking about NFTs earlier and you mentioned that you haven’t actually bought any NFTs yourself yet, but you are excited about them. Tell me about that.

I bid on a bunch and I keep missing out on these auctions. Not the Beeple one, but I did bid on the Urs Fischer. Urs, he’s an awesome artist. I’ve been trying to buy one of his sculptures for a whole lot of money and the NFT seemed cheap. [Bidding on the work started at $1,000; it ended up selling for nearly $98,000.] I find this to be a fascinating space — I think it’s going to revolutionize the way we think about IP, about creativity, about engagement. And I think we literally have no idea where it’s going, partly because how we display our NFTs, that part of the equation isn’t even close to being started yet. Right? I’m thinking, if you buy the $69 million Beeple, you want to show it off. Well, that means I want to be able to go to my house and have a giant screen in my living room that’s cool as can be where my NFTs can show up. I want to meet you in the metaverse and maybe we’re having tea in my man cave, and I can pull down the Beeple and we can play each one of the 5,000 individual images that make it up and blow them up and look at them.

When I was talking to Urs Fischer, he was doing this egg with a big lighter in it. He loves to combine objects and it was really cool. I’m bummed I missed it. But I was thinking, in the future, we’ll wear these AR glasses and I can walk down the street with my Urs egg floating on my shoulder. And people will be like, Dude, he bought that fucking egg. You know, like an amusement park almost. But people were like, Dude, you’re so wrong. You’re so old. Like, we’re gonna live in the metaverse starting now. So I tried real hard to be Gen Z — but then I kicked right back into boomer mode.

A Bitcoin Billionaire on When to Sell, Dogecoin ‘Nihilism’