Julie Cooling, Founder and CEO, RIA chain interviewed Michael Novogratz, CEO and founder of Galaxy Digital, an investment bank dedicated to digital assets and blockchain technology. In 2018, Galaxy launched the Bloomberg Galaxy Crypto Index (BGCI), an index designed to track the performance of the largest liquid cryptocurrencies such as bitcoin, Ethereum and XRP. Galaxy recently launched the Galaxy Bitcoin Funds, which offers simple and secure exposure to bitcoin for institutional and accredited investors. They currently manage over $ 350 million in assets.
Blockchain is a proven peer-to-peer network technology actively used today by some of the world’s largest institutions to digitize their activities and improve their efficiency. To transact in a decentralized environment via any blockchain technology, cryptocurrencies are required. Many cryptocurrencies are used as a medium of exchange, while bitcoin is widely regarded as a store of value and an alternative to other physical assets such as gold. The IRS classifies cryptocurrencies as assets, and it is perfectly legal to use bitcoin to make transactions.
As more and more traditional businesses embrace digital assets and invest in infrastructure to support it, the overall system should become more secure and the company’s values within this asset class should rise. Fidelity now offers custody of cryptocurrencies, for example. Facebook recently announced Libra, a new cryptocurrency that is expected to be released in 2020 to facilitate global payments and give consumers low-cost, easily accessible capital. Some investors are concerned about the recent volatility of bitcoin and the overall value of digital currencies. Warren Buffett has been very outspoken about his disregard for cryptocurrencies, calling them “elusion” and saying he will never invest bitcoins.
As skeptics set aside their investments, Novogratz points to the younger generations who maintain a higher level of comfort in the digital ecosystem and who actively invest in bitcoin, blockchain companies and modern payment platforms. Novogratz also points out that the asset class as a whole is not correlated with the equity and bond markets, adding diversity to the portfolios and thereby reducing the overall risk of the portfolio. An expert in macro-hedging, Novogratz is no stranger to risk and considers bitcoin and the entire universe of digital assets as an opportunity for many unknowns. As investor education, transparency, retention and access points improve, Novogratz plans to participate by investing methodically and wants to bring its investors with it.
For more information on Galaxy Digital, watch the recent RIA Channel webcast: Diversification with digital assets.