(Bloomberg) - Mike Novogratz, the founder and chief executive officer of Galaxy Digital Holdings Ltd., said two-thirds of the hedge funds that invest in cryptocurrencies will fail as a consequence of the current market downturn.
“Volume will go down, hedge funds will have to restructure,” Novogratz said at the Piper Sandler Global Exchanges & Brokerage Conference in New York. “There are literally 1,900 crypto hedge funds. My guess is two-thirds will go out of business.”
The former Fortress Investment Group hedge fund manager cited the broader financial market’s reaction to the removal of stimulus by the Federal Reserve as the reason for the collapse in token prices over the past six months. Bitcoin has dropped more than 50% from a record high reached in November. Novogratz also attributed last month’s collapse of the Terra blockchain -- in which he and Galaxy were investors -- to the broader macroeconomic factors rather than to flaws in the project.
“It wasn’t strong enough to deal with the headwinds of Bitcoin prices going down, crypto prices going down. It was a catastrophic loss,” Novogratz said. “The CEO was unbelievably bright and charismatic and there was a tremendous amount of momentum behind what he was doing.”
PwC’s annual global crypto hedge fund report showed that Terra USD (UST), was the third most popular stablecoin among crypto hedge funds they surveyed in April 2022, or right before Terra collapsed. And 49% of PwC’s survey respondents also traded the affiliated Luna token, which Novogratz immortalized with his now infamous tattoo.
Even so, Galaxy will continue to expand in the downturn, in contract to rivals such has Gemini Trust Co. that are laying off staff to survive the bear market, Novogratz said. The New York-based crypto brokerage and asset-management firm wants to be “the go-to-place” after the downturn is over, the crypto billionaire said.
(Adds additional comments from Novogratz, starting in the fourth paragraph.)
By David Pan
