Mike Novogratz: Bitcoin's Next Stop, Altcoins Sucking & Predictions

I made a fortune on SpaceX. I'm just looking at it now. Like a bizarre fortune. Charts don't lie. People do. So, you always have to look at what the chart tells you. We're going to go back through 100 in the next 6 weeks or 6 months because we're going to get a dovish Fed share. They're going to cut rates down to 2.5%. It's as bullish as it's ever been. The flash crash was terrible for this industry because it took out 20 to 30% of the market makers. AI is a bubble and my guess is it's going to become the greatest bubble of all time. It's such a powerful story. All coins have sucked because they were designed to suck. The number one rule of investing is don't die, which means don't be stupid. Don't bet everything. Here's my other dirty secret.

Thank you.

He's got 15 days and a lot of explaining to do.

Yeah, I don't think we're getting there.

Listen. So I had a sign in my hedge fund. Charts don't lie, people do. Right? The charts don't lie. So you always have to look at what the chart tells you. And when you look at the Bitcoin chart, we spent a lot of time above 100,000. 100,000 was a psychological big issue, right? We got to 100. We all felt like we accomplished something. I mean, I even put out a tweet or a post where I congratulated the community. I congratulated Galaxy. Like this big accomplishment. There was a tremendous amount bought above 100, right? And we came and held it a few times. When you finally broke below 100, if you look at the chart, you can draw it. There's this very nice horizontal line. That's when we accelerate. We went from 100 down to 85 or 80, 82,000, whatever the low was. Real quick amount of time. That's people stopping out. That's people putting short positions on. So now that 100 becomes resistance. Normally you don't go right through that 100 the first time up. You might trade up there and roll over again. And there's a lot of trapped longs, right? People that bought above 100 that at one point just want to get out of this thing. And so it corresponds with the four-year cycle that you hear so many people talk about. Four-year cycle ended just recently. There's a self-fulfilling idea that from a lot of crypto OGs that come back in nine months, 10 months and it's time to buy it again. And so I don't know if we're going to go back through 100 in the next 6 weeks or 6 months. My view is we do because we're going to get a dovish Fed share. They're going to cut rates down to 2 and a half%. We're going to get good legislation passed in the United States, I think. And having just got back from a week in the Middle East, I'm more convicted now that the future of blockchains and digital assets, real world assets on blockchains, is as bullish as it's ever been. That doesn't mean the price of you name the token is going to go up in the next 6 months, right? Being bullish on building out that infrastructure of neo banks and distributing Galaxy stock or Tesla stock or Google stock into places all around the world. That's going to happen. That's an 18-month to three-year buildout process. And so we're kind of stuck in between this new bullishness that the industry finally arrived and we still have all these tokens that need energy, right? Because most of the tokens that exist today are tokens that represent something, right? They're community tokens. They're not equity-like tokens. Hyperliquid being an exception to that, right? Where you can easily look at the math of how much Hyperliquid does. And so, they're tokens that need storytellers. They're tokens that need new liquidity. It's just going to take time to rebuild that, right? The flash crash was terrible for this industry because it took out 20 to 30% of the market makers. And since that flash crash, I don't care if you talk to the guys at Binance or Bybit or Kraken or us, the institutional volumes are down 30 odd percent. That means liquidity is down 30%. And every time we've done that in the past, it just takes a while to rebuild. How does that get rebuilt? Well, in retail, people get paychecks, they sell on their assets, they slowly start gambling again, and institutions like to buy on momentum. I think we have kind of sideways and less than thrilling markets for a while, and you got to watch where it bottoms, and then we'll have another runup.

God I hope not much longer. Listen, I wish I knew. I think from what we saw the bulk of it got on a lot of it's come from China and we don't see as much of that. We sometimes see it indirectly. What's interesting with the Chinese whales, they often are trading and they'll buy back somewhere, right? Whereas the whale that we executed, I would be very surprised if that money ever comes back into the system. That was a one-off. Someone got lucky and bought a whole bunch a long time ago and decided to take profits and have a new life. I wish I could answer the question. I do feel a lot of it. You people had plenty of time if you were going to get out and if you held it back to here. I was actually talking to a guy who's got a huge stack. And he's like, 'Yeah, maybe I should have sold something at 120. I didn't, but I'm not going to sell it here on the next leg up. Even if it's a four-year cycle, that's when he'll sell something.' And so as long as crypto doesn't fall below 70, like if Bitcoin got below 70, maybe people their pants and get nervous that oh my god, I got it. But I don't think you see selling in the mid to low 80s from long-term holders.

Yeah, that's going to continue to happen. It's just going to continue to happen. There's, you know, listen, balls down a lot. You don't get paid nearly what you used to get paid for it, but there is a mindset that that's a nice way to make income, spend on my car or my boat or whatever I need to spend it on. And so that's become almost a permanent feature I would say. And that'll weigh on the market.

Yeah.

In the short run I think if I was a big institution I'm waiting for it to get back above 100 then buying at 87 unless it really goes lower and so it's time but you also like crypto is always sold. To sell something, I need a story. So the story has got to be if it's Bitcoin, it's got to be about liquidity. And so let's wait to see the new Fed chair. Let's wait to see what he talks about where rates are going. Let's wait to see what the US Fed does with, you know, you could make a story where they make Fannie and Freddie risk-free assets. Well, that would add trillions of dollars or hundreds of billions of dollars to liquidity in the banks. You know, one thing, Trump and Besson and whoever he picks to run the Fed once markets higher, they want the US to continue to be able to fund its deficit. They're going to print money. When that story picks up again is probably when you see the next leg and then the momentum like on a chart now, it would be, you know, get us back through 100. I thought wrongly that in the next two weeks we were going to grind up to 97, 98, 99 and kind of stall there, maybe even 102. Now the chart tells you doesn't look so good. We could stay here. We could bounce. But like you really got to get above 95 level to even have a shot at getting up to 100, 102. You know, if you're a trader and you sold that your stop loss is 95. We've learned in crypto one giant buyer can change things quickly. And the markets are not that liquid right now. Someone came in and wanted to buy $2 billion, we'd be above 90 in about 15 seconds.

I would say DATs are dead. There's going to take some time to figure out what becomes of them. Some of them are trading at 30% discounts. We were having this conversation today. What do you do with the one that's trading at a 30% discount or a 40% discount? Well, you can buy their stock and sell your Bitcoin. Put the trade on yourself. They can do that, you know. And at one point, some of these stats will transform themselves into really cool new businesses, right? It's permanent capital. You've got capital, you might as well do something with it in that space. They're not going to be just ETFs like Michael Saylor created this ETF-like structure that traded at a premium and then he became yield on it. And you know, I always thought he was unique in that he became a crypto himself. When everyone tried to copy it, you don't have the capacity to do that. So now you've got I don't care if it's Nakamoto or Pump's dad or the VEX dad. All of them are going to trade at big discounts. I don't think they weigh on crypto anymore. Though they could weigh some because someone could buy the stock and sell the underlying, but they're not going to be a way money comes into the system anymore, right? RTO got burned. That's been one of the reasons we're down is we lost our buyer. That's where the buyer, we lost the buyer. The next buyer is going to just be the continued trickle of wealth, right? If you look at JP Morgan or Bank of America, any of these big wealth platforms, right, that have the RAAS, remember, we have about $45 trillion of wealth managed from the baby boomers. It's managed by stock brokers in the old days we call them. Right now, they're called registered investment advisors. If they move to 3% allocation to crypto, that's $1.2 trillion. 5% allocation is $2 trillion. Like the whole market cap of Bitcoin is what 1.7 trillion. You know, as wealth starts to allocate, it dwarfs everything else. And that's just starting.

Yeah, so that will continue to happen. Again, once the market structure bill passes, it makes Wall Street even more crypto friendly. You know, Wall Street is a selling machine. It was set up I live down here. It was set up and built to sell stuff, right? We're raising capital by selling it to people. It's the greatest selling machine the planet ever created. Now you're going to put Bitcoin and other digital assets through that selling machine. I usually bet on Wall Street.

Very smart. He believes everything he says. It was a very thoughtful idea that they came up with, sanctioned by the board to say, 'Hey, let's put at least enough cash in a reserve to take off the run of the bank for the next couple years.' And I think that calmed things down. Can he get the stock trading at a premium again? We'll see. I think it's trading about 95 cents on the dollar right now. And when it trades below par, you know, below NAV, you know, for a while it drifts into the category of just another closed end fund doesn't do anything bad for the system, right? We have closed end funds in every product in the financial services. It just becomes less exciting. Why it's important for Bitcoin is he was the number one salesman for Bitcoin, right? He was the community salesman. He was the face of the story. He's very articulate. He's very animated and excited about it. And so if his platform becomes dull, right, strategy trades at a 15% discount permanently, there's just less energy of bringing people into the tent. In some ways, it's always time to find the new salesman. I was willing to retire a few years ago because I was laughing. I said, I've told the story of Bitcoin so many times, people are sick of hearing from me. You got to have a new generation of people that are bringing people into the tent. Larry Fink did the best job of it, right? Because his platform was the biggest. The community needs to constantly refresh itself. The story doesn't change, right? And keeping the story simple, but new generations, new avenues of bringing people into Bitcoin. In some ways, it is a game of building trust with your fellow citizens, your fellow people in your community, right? It's the value of Bitcoin comes from the social construct that me and you both agree it has value. If you're crash, you could call it a multi-level marketing machine. I sell it, you sell it. But if everyone stops selling Bitcoin, let me tell you what the price happens goes down. All of these ecosystems need energy. What's been fascinating is how many of them have been able to keep energy. What is energy? Energy is how do I bring eyeballs to the story? So you need Bitcoin would not have existed without Twitter. Right.

That's true. I mean, think about guys like Brock Pierce reversing he was walking around handing people Bitcoin telling the story. You think about all the OG storytellers. They all deserve a pat on the back for the work they did, you know, pushing the ball forward. Dan Moorehead probably did more institutional talks on Bitcoin than any man that ever walked the planet, you know, but it was, you know, there are hundreds of them and thousands of them quite frankly. And then there someone in every small village was telling that story. That's what makes crypto valuable. It's the community. We're transitioning now. Utility is going to be much more important. Not just in reality, but for the story. Because now that blockchains are fast enough to be used, the legislative framework's allowing them to be used. People are like, 'Okay, what does it do? Show me how it works.' And so it's going to be harder for blockchains that don't do a lot. And we have a lot of ghost chains with high valuation to keep their story alive, right? No story, no value.

When I think of what Bitcoin has morphed into standing for is a hedge versus the unbelievably irresponsible fiscal and monetary policy that the West has engaged in. And that happens in every cycle. That happens every reserve currency blows it. They print too many dollars and you debase the dollar. It had energy of the system because of what happened in '08. The system's not fair. We want to have our own place to store our wealth. But it really still is a store of wealth. It's I'm trusting this community to store my wealth because I don't trust the Federal Reserve. I don't trust the US government won't keep Donald Trump's never liked the tax he wouldn't pay. Right? He loved debt his whole career. And so why do we think now they're going to get responsible? And they're not. Right? The deficit's bigger now than when they took over or just as big. We're at 38 trillion dollars in debt. We're going to be at $40 trillion in debt. And so that's really the story of Bitcoin. And I don't know if it matters if you keep it, you know, on your treasure you in your safe in your garage or if you keep it custody at Fidelity. You're buying it for that same reason really because you think the dollar is going to be worth less. I've got a I was looking this morning in here was my gold. Got a drawer full of gold coins, you know, and I was like, I got to get a safe because when I bought them, they were all worth like 1,200 bucks and now they're worth $4,000 or $4,300 and I got 50 coins in there. And I was like, it was the same reason. And we were digital gold. And I think getting away from that story makes it complicated, you know, and yes, it started, you know, Satoshi thought it was going to be, you know, going to be money. Well, money you can confuse as store of value or a payment system. It was I don't think it was ever meant to buy your Coca-Cola.

I think they're going to cut rates. I think jobs are a bigger worry in the administration than the market has them. Right? This idea that AI is hitting jobs I think is real. And so watch non-farm tomorrow. But as long as you have job weakness, you're going to have a very dovish Fed. It doesn't matter what Kevin. I know the market perceives Kevin Warsh is going to be more hawkish. He's not. He wants rates down at two and a half%. That I think is a good story. Do they do QE? I think probably more likely with Hassid than with Warsh. I think the first chapter doesn't matter because it's just getting rates down. And I think what's also going to see is like they're going to allow banks, you already did this, to get more levered up. I said like if you take Fannie and Freddie and make them risk-free assets, it's trillions of dollars of liquidity or hundreds of billions of dollars liquid. I should get the I should know the number. What do banks hold on their balance sheet in mortgages? And if those become risk-free and so you're already you know they did this thing with the SLR which is giving banks a lot more liquidity and so you're already jamming liquidity I think it'll start after the new year right because right now there's year end liquidity that's liquidity gets tight as people want to clean up their balance sheets just for the snapshot and so I do think we're going to be in a hyperliquid space.

You got to have the yield curve steepen around you got to be long two years but short 10 years because that should be a good environment for gold, silver, Bitcoin. Right now, silver is the horse in the front of the race. Normally, when you get close to the end of the year, the horse in the front of the race wins. You got to bet silver and gold outperform Bitcoin in the next two weeks. But next year, you get a new race.