Galaxy’s Mike Novogratz Says ‘Crypto Revolution Is Here to Stay’ Despite Selloff

Galaxy Digital Holdings Ltd.

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His Mike Novogratz assures investors that “cryptocurrency is not going away,” even as inflation, rising interest rates, and a massive sell-off have roiled the digital asset market.

“This does not mean that the crypto market will bottom out and rise again,” Novogratz wrote Wednesday in a letter to shareholders, friends, partners and the crypto community. “It will do restructuring, a cycle of buybacks, consolidation and renewal of trust in crypto.”

“Cryptocurrencies move in cycles and we just saw a big cycle,” he added.

Mr. Novogratz, former Goldman Sachs Group Inc.

and the chief executive officer of Fortress Investment Group, has emerged as one of the most ardent supporters of cryptocurrencies on Wall Street. He invests heavily in digital assets and in Galaxy Digital built a business designed to provide a variety of financial services to the crypto industry that Goldman and other banks have done. long ago for companies and professional investors.

“I am more convinced than ever that the crypto revolution is here to stay,” he wrote.

Mr. Novogratz’s unwavering enthusiasm for the future of cryptocurrencies has relieved many other veteran financiers and made him a cult figure in a world that has attracted millions.

That community is currently facing a crisis of confidence, following the recent collapse of TerraUSD, or UST, and sister stablecoin Luna that has further plunged many popular digital assets. Galaxy is already an investor in Luna, and in January Novogratz posted on Twitter a photo of his new tattoo: a wolf howling at the yellow moon. “I’m officially Lunatic!!!” he wrote.

Stablecoins like TerraUSD are pegged to the value of government-issued currencies, including the US dollar. However, at the beginning of this month, a high volume of transactions pushed TerraUSD below the $1 peg. Luna also fell over. Investors have continued to unload both currencies.

“The macro backdrop puts pressure on Luna and UST holdings,” he wrote. “Downward pressure on reserve assets, coupled with UST withdrawals, has caused a stress scenario akin to a “bank run”.

In his letter, Mr. Novogratz wrote that Galaxy invested in Luna at the end of 2020. Since then, he said, the company has followed a core principle of good investing: “keep a good portfolio. Diversified investment, returns along the way, has risk-management framework,” and “understands that all investments take place within a macro framework. ”

In the letter, Mr. Novogratz did not say whether Galaxy lost money from its investment in Luna, how much it reduced its stake, or whether he suffered any personal losses during the sell-off. or not.

As of December, Galaxy owns about $400 million in Luna. Earlier this month, Galaxy reported that sales of Luna were the biggest contributor to the $355 million realized net profit from the digital asset it recorded in the first quarter.

“With hindsight, things are always clearer,” writes Novogratz. “My tattoo will be a constant reminder that venture capital requires humility.”

Write to Justin Baer at justin.baer@wsj.com

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Edmund DeMarche

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