The first Bitcoin and Ethereum investor Mike Novogratz is revealing his insights into where the market is heading and what is needed to trigger a bull run.
Novogratz manages Galaxy Digital, which invests directly in cryptographic companies, from ICOs to infrastructure platforms, portfolios and custody solutions. At the recent Beyond Blocks Summit in Seoul, he explained why he believes in the New World Order that the crypto developers are trying to create, and what motivated him to expand his involvement in the crypt well beyond his initial speculative investment in Bitcoin.
I looked at my portfolio and I had a lot of Bitcoin and I made a lot of investments. I had an investment in Korbit here in Korea. I invested in Bitstamp and Zapo – in all the types of portfolio companies I had made a few years earlier. And I had a college roommate, Joe Lubin, who now runs a large company called ConsenSys. But at that point, it was a very small company. And I decided to go and see him and I thought he was a little smarter than me and could be able to talk to me about my portfolio.
It so happened that I went into his office and was surprised by the energy. It was a small company, from 20 to 25 people. I thought it would be two. And I was like, how did you hire 25 people? And they were literally planning a revolution. A decentralized revolution.
And it was the first time I understood that cryptography was much more than just a speculative resource. That this was a social phenomenon, it was a cultural phenomenon and an economic phenomenon. And that the people who were getting involved in it really worried about changing the world. It is often easy to think that this is just money, but when you meet the guys who are at the center of it, when you sit down with VItalik or Alex Morcos, who is a major developer – or some of the guys, they really care about a new world order. It came out of the financial system crisis in 2008. And then Europe broke out again in 2012. It came when people feared the central authority. And so I got inspired and bought a lot of Ether, and it was like 96 cents. When you buy something cheap and go higher you start paying close attention to it. "
Novogratz says deep-seated institutional investors are preparing to jump into the market and learning as much as possible how cryptography works to make sure their investments are safe before they take the plunge.  "Two years ago, if I went to meet an institutional investor, they would not know anything. They would be very interested in hearing you talking, and then you'll leave. And now, when I meet a CEO or CIO, I'm surprised at how much they know. How much work they did. Most of them did not take the first step in terms of participation, but woah, they are doing a lot of work …
I went to visit Jeff Sprecher who is the CEO of ICE, which is the the parent company of the New York Stock Exchange and around 30 other stock exchanges worldwide. They are the largest exchange company in the world. And I thought I was going to give him my Bitcoin story. And after about two minutes, I just shut up and started listening. He knew much more about hydraulics and the future of how coins will be exchanged than I ever imagined. "
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According to Novogratz, there are some pieces of the puzzle that are missing before those heavily hit Wall Street investors will be at ease in encrypting.
" To get institutional investors, they are missing some things. The biggest thing missing is the housing. And this is a little weird because we have a lot of good custody solutions. Xapo is an excellent storage solution. BitGo is an excellent storage solution. There are many out there. But if you think about how institutional investors work. If you're the state of Wisconsin or if you're a retirement fund, it's hard to tell your boss if something went wrong, & # 39; Well, I got my money with Bitgo or Zapo. & # 39; People have never heard of those places.
And so what you really need as a bridge is that you need a custodian of trusted names. You need a Japanese bank or a bank in Hong Kong, Shanghai or State Street or ICE or Goldman Sachs to allow institutional investors to feel more comfortable. And this will happen …
We will not pull out $ 20,000 in Bitcoin or $ 1,300 in Ethereum until there is a real institutional custodian. The second piece that is needed and coming is regulatory clarity. Because the United States controls the global banking system, it really needs clarity in the United States. Arriva. "
Novogratz argues that attractive custody solutions that attract institutional investors will come fully within a year and bring the price of Bitcoin to at least $ 10,000.
Regarding the impact, regulators of the government are Having space, Novogratz states that US regulators were shocked by the huge increase in the cryptocurrency market last year and claims to be pleasantly surprised at the actions taken since then.
Believes that the single signal more The regulators' recent statement that Ethereum is not a security is positive by the regulators.
I was wonderfully happy with the posture of the US regulators First of all, all the legislators missed the crypt. 98% retail, it was the popular revolution … and so the legislators missed it.The regulators came from the institutional world. The head of the SEC worked at Sullivan & Cromwell. They come from JP Morgan and Goldman Sachses. And so, they missed it. And it was small and did not care. And then last fall, October, November, December, January, there was this frenzy, this madness in which prices went up. And the regulators said, "Oh shit, we have to do something quickly."
And so what they did in many places is just saying "Stop". Or they said: "Put the brakes". And they were giving themselves time to understand what was happening. So the SEC, they cited the companies. They really dug, and the first thing they decided is, let's go after the fraud and let's go after the market manipulation. And slowly we set the rules as we understand it better.
And so it was really a big deal to say that Ethereum is not a security because they have given a way forward. Most of the tokens issued in the last 18 months were security tokens. They were issued without having an adequate decentralized ecosystem to start. But what the SEC did, and I think what's going to happen is, for example, "You could have started as a security token, but now you're a utility token." I think you'll see someone fined. They will say "Yes, you should have known better and now you will become a utility." But I do not think they want to destroy the whole system … & # 39;
And therefore, regulators should protect the child. And they were doing a poor job. And so it is changing. And when we'll have a little more regulatory certainty, we'll see the institutions feel a lot more comfortable entering. And we need them. People say, "Well, why do we need institutions? Are not we going back? "You will not change the world with half a trillion dollars of market capitalization, so that the encryption really achieves its mission, we need much more money in the system to finance many of these projects."
Regarding the cryptocurrency is the best single to invest, Novogratz preaches the diversity and says to try to choose which platform will have the most success is not a smart way to invest in the market.
"We have 100 blockchains, about 30 or 40 in China alone, and then another 60 or 70 outside … They are all trying to become the same thing. They want to be this decentralized global super computer that it processes the data, which authenticates the data, and therefore, it is a race to see who will take the adoption …
None of these is fast enough now for any real institutional application. You will see a side chain on many of these blockchains: Sai, state or plasma channels in Ethereum, or Bitcoin lightning, they go from very decentralized to less decentralized – EOS is already the fastest blockchain I believe and is only three weeks old. His critics will say that he is not decentralized enough.There are 21 nodes, that the Chinese control many of them.It has three weeks.We give a little time.We see how it develops.
My philosophy is: do not think you are so smart body to choose from the only winner. Is it NEO or RChain or Thunder or Ethereum? Listen, Ethereum has a gigantic advantage. Most of the developers. There is an incredible human capital in the system. But they have a great transition to make. They have to go from demonstrating work to the test of the stake and face a mining community that will lose money throughout the process. So we'll see. I find Vitalik one of the smartest guys on the planet, so I would not want to put him short of him. "
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