Novogratz says the ‘clearest trades’ are long gold, euro, bitcoin

by James · April 12, 2023

(Bloomberg) — Galaxy Digital Holdings Ltd. founder Mike Novogratz said he expects gold, the euro and cryptocurrencies Bitcoin and Ether to outperform rival investments as the Federal Reserve moves toward easing rate hikes after recent bank failures lead to a potential credit squeeze. crunch.

Most read from Bloomberg

“The clearest trades have been and will continue to be long gold, long the euro, long Bitcoin, long Ethereum — those assets that should do well with the Fed stopping hiking and then cutting,” Novogratz said in a Bloomberg Television interview Wednesday.

With the recent failure of several regional banks, lenders are likely to take on fewer borrowers, which could result in a U.S. credit crunch, Novogratz said. That will in turn “slow down the economy,” which will ultimately spur the Fed to cut interest rates more aggressively than expected, with the first reduction in borrowing costs potentially coming by the end of the year, he said.

Bitcoin would be in a “sweet spot” if interest rates were to fall again, Novogratz said.

“Bitcoin had a great run,” he said, pointing to the $30,000 price point reached this week for the first time since June 2022, when hedge fund Three Arrows Capital and other firms imploded. “We can consolidate here before we move towards $40,000, as long as the Fed plays the way I think it’s going to play.”

Fed policymakers scaled back expectations for rate hikes this year after a series of bank collapses rocked markets last month, stressing they would be alert to the potential for a credit crunch to further slow the economy, according to minutes from a March 21-22 meeting. March. meeting announced on Wednesday.

As for stocks, Novogratz said he expects them to be “range-bound” this year.

“They’re still relatively expensive,” he said. “They’re not really cheap to buy as a value, and they appear to be expensive, so my bias is to be flat to short.”

While the US Securities and Exchange Commission is cracking down on the crypto industry, other regions including Hong Kong, Abu Dhabi and Dubai are pushing for crypto-friendly regulations, Novogratz said. Galaxy recently hired six more people in its Hong Kong office, he said.

A major uncertainty for crypto markets is how US regulators will deal with Binance.

The Commodity Futures Trading Commission “has sued them. My hope, and my bias, is that they will negotiate a very large fine for KYC failures like Binance did in the past, and Binance would pay their fines and move on,” Novogratz said, with reference to the “know your customer” rules. “That would be the best thing for the crypto community.”

–With assistance from Sonali Basak.