Galaxy's Novogratz Predicts End to Crypto's Speculative Era
Mike Novogratz, CEO of Galaxy, suggests the cryptocurrency sector's volatile, high-return nature may give way to more stable yields driven by the tokenization of real-world assets.
The era of extraordinary returns in cryptocurrency markets could be drawing to a close as institutional investors with lower risk appetites increasingly enter the sector, displacing retail traders who pursue quick profits, according to Mike Novogratz, CEO of Galaxy.
Speaking at Tuesday's CNBC Digital Finance Forum in New York, Novogratz reportedly indicated this shift represents the industry's ongoing maturation process.
"Retail people don't get into crypto because they want to make 11% annualized," he said. "They get in because they want to make 30 to one, eight to one, 10 to one," he said.
He pointed to the 2022 collapse of FTX, which triggered a prolonged bear market that witnessed Bitcoin (BTC) values plummet 78% from $69,000 down to $15,700 by November of that year, explaining that this period created a "breakdown in trust" within the market.
The Galaxy CEO also recognized the Oct. 10 leverage flush as a notable occurrence that "wiped out a lot of retail and market makers," contributing to heightened selling pressure — despite the absence of any clear major trigger.
"This time, there's no smoking gun," he said. "You look around like, what happened?"
"Crypto is all about narratives, it's about stories," he said. "Those stories take a while to build, and you're pulling people in … so when you wipe out a lot of those people, Humpty Dumpty doesn't get put back together right away."
Tokenized real-world assets will drive markets
According to Novogratz, the industry is expected to transition away from high-yield speculation toward more utilitarian use cases, including tokenized real-world assets that deliver more consistent returns.
That said, certain traders will continue to engage in speculative activity, Novogratz noted, but this behavior is going to be "transposed or replaced by us using these same rails, these crypto rails, to bring banking [and] financial services to the whole world. And so, it's going to be real-world assets with much lower returns."
Sergey Nazarov, co-founder of Chainlink, echoed similar sentiments on Tuesday, asserting that tokenized RWAs will "surpass cryptocurrency in the total value in our industry, and what our industry is about will fundamentally change."
Long-term Bitcoin believers will be fine
In related commentary, David Marcus, co-founder and CEO of Lightspark and a former executive at PayPal, shared with Bloomberg on Tuesday that a transformation in Bitcoin ownership patterns has also taken place.
"It's just a change of who's holding Bitcoin, and you're moving from people that had long-term belief and were holding Bitcoin directly to just access to Bitcoin being wired off to our financial system and markets."
Marcus further explained that the shift in ownership composition combined with the Oct. 10 leverage flush has altered the market dynamic, though individuals maintaining the long-term conviction that Bitcoin serves as a "hedge to everything else that's happening in the markets" will be fine.
