Wall Street veteran Mike Novogratz has revealed his damning stance on ICOs, claiming that the “market is dead” due to fraud and unsustainable hype.
Galaxy rack up $136 million in losses
The former Goldman Sachs partner and hedge fund manager admitted that his cryptocurrency firm, Galaxy Digital Holdings Ltd, has seen losses of $136 million in 2018 due to the gruelling bear market.
However, although his outlook on crypto may have changed due to Bitcoin’s drop from $20,000 to $3,400, his strategy for Galaxy hasn’t changed “as dramatically as one would think.”
Speaking to Bloomberg, Novogratz said: “We have a business that we think can break even next year, if not make money. We’re not nervous; we’re frustrated that our investors have lost money. We’ve got plenty of cash to run the business for a long time. I keep telling my guys we’re a surfer getting ourselves in shape for when the next wave comes, and when the wave comes we’d better be the Laird Hamilton of crypto.”
“The ICO market is dead”
One of the main factors of 2017’s hype-cycle and subsequent bubble was the hype surrounding ICOs, with many start-ups generating frankly unhealthy yields of up to 10,000%. Novogratz believes that while the ICO craze is over, the SEC don’t want to halt innovation.
“The ICO market is pretty much dead right now,” he added. “There was a lot of fraud, and there was a lot of hype, and people lost money. The SEC was behind the curve, so they slammed on the brakes. But the SEC doesn’t want to kill this innovation; we’ve spoken to them at length.”
Speaking about how cryptocurrency start-ups can still grow in the space, Novogratz continued: “I think you’ll see a market for security tokens—a real-estate portfolio that gets tokenised, for example. These aren’t things that go from $1 to $1,000. They’re things that yield 14%, and they’ll be sold to qualified buyers. That sounds a heck of a lot less sexy, but you’re going to see that business grow.”
The euphoria was a drug
Novogratz goes on to succinctly summarise the feeling of euphoria many felt during the peak of 2017’s bull market, claiming that “it was a drug.”
He concludes: “That was a drug, and I don’t say that lightly. When you’re in the speculative mania, testosterone is boiling over and there’s a lot of greed. The audience is more sober now—the drug is gone. If anything we’re on the other side, at the stage where there’s the pessimism and the fear, and the ‘Oh my God, it’s going to zero.’ But it’s not going to zero. We’re at the methadone clinic.”