December 15th, 2015

Former hedge-fund titan Michael Novogratz breaks down 4 reasons why bitcoin is heading to $20,000 by year-end

REUTERS/Rick Wilking

  • Michael Novogratz, a former hedge fund manager and CEO of Galaxy Digital, thinks Bitcoin will "end the year closer to $20,000, the old highs."
  • After making a sharp-witted comment about the cryptocurrency at a conference years ago, and due to his high-profile, Novogratz was forced to become educated on the matter due to the amount of inquiries he was receiving.
  • He relays 4 reasons why the cryptocurrency could head back to its old highs in 2020, and says he hasn't "seen things line up as well in a long time."
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"I'm really bullish."

That's what Michael Novogratz, a former hedge fund manager and CEO of Galaxy Digital, said on "The Tim Ferriss Show" podcast (recorded May 18, 2020) when asked about Bitcoin

"I was the first institutional-grade investor that started talking about it, for better or worse, back when it was trading around a hundred," he said. "I made some witty comments about Bitcoin and the next day I was on the cover of the Financial Times."

For context, the last time Bitcoin traded around $100 was in 2013. Since then, Bitcoin has been front-row center on a rollercoaster of volatility, trading anywhere from upwards of $19,000 in 2017, to lower than $4,000 in 2019. Today, Bitcoin is churning north of $11,400. 

At the time of his comments, Novogratz was still a cryptocurrency neophyte. He didn't have a firm grasp on the inner workings of the asset.

"And at that point I didn't really understand how it worked that much," he said. "I understood that it was the thing that was going to go higher, but partly by being forced to publicly speak about it, I got asked to speak at the Oxford Union and I really had to study and try to understand how the damned thing worked."

He continued: "And so I became kind of an unofficial spokesperson, or one of the unofficial spokespersons, for it."

At Galaxy Digital, Novogratz oversees a diversified array of digital assets that currently tops $350 million in assets under management. And even though he clearly has high hopes for the cryptocurrency's future, he's quick to note that its proliferation isn't a sure thing. 

"And listen, I'm always careful when I say 'really' because these things are recorded and you come back later and people are like, 'damn, that guy was stupid,'" he said. "It doesn't work. And so you're cautious to be that bullish publicly, but I haven't seen things line up as well in a long time."

Against that backdrop, Novogratz relays four reasons he thinks Bitcoin will "end the year closer to $20,000, the old highs." All quotes are attributable to Novogratz.

1. Store of value

Novogratz notes that Paul Tudor Jones, the billionaire investor and founder of Tudor Investment Corp. recently entered the cryptocurrency space and helped increase the legitimacy surrounding the once taboo subject.

"You might not put it in your portfolio, but there's no shame in being involved with the space anymore," Novogratz said. "And that's a big deal because for stores of value, and Bitcoin is really becoming a store of value. They only become stores of value when people believe they are."

He added: "And so it's a belief system. Bitcoin is not just the code. It's really the social construct. I say it's this, you say it's this, therefore it is this." 

2. Adoption

Novogratz notes that big-name investment managers, CEOs, and entrepreneurs — Abby Johnson, Jack Dorsey, and Wences Casares, to name a few — are either buying the asset or getting their respective business practices aligned with it. In doing so, it's helping to bring Bitcoin to the forefront of investor attention.

"Paul's the first kind of legend in the hedge fund space that didn't just buy it personally, but he bought it in his fund," he said. "And so it opens up a whole new avenue of potential participants in that community, which I think is really, really significant."

3. Supply constraints

"Once these store values start building momentum, there's not a lot of supply," he said. "We've had this thing called the 'halvening', where there's half the supply being mined than there was even a week ago."

4. Increasing avenues of access

"Bitcoin has been a young man's game. It's been Gen Z and the millennials, it's been bought on Coinbase app or Square or Robinhood. Those things aren't going away. Quite frankly, there are going to be more of them," he said.

"Facebook's Calibra is going to allow you buy Bitcoin. And that'll be 2,000, 3,000 people using that wallet. And so there are so many more avenues of access. I always tell people if it was easy to buy, the price would be far higher already. Bitcoin's been hard to buy and a year from now, it's going to be that much easier."

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SEE ALSO: Billionaire investor Paul Tudor Jones famously earned a 4-year streak of triple-digit returns. Here are the 7 trading rules he lives by after suffering a devastating loss.

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