Julie Cooling, Founder & CEO, RIA Channel interviewed Michael Novogratz, CEO and Founder of Galaxy Digital, a merchant bank dedicated to digital assets and blockchain technology. In 2018, Galaxy launched the Bloomberg Galaxy Crypto Index (BGCI), an index set to track the performance of the larger, liquid cryptocurrencies such as bitcoin, Ethereum, and XRP. Galaxy recently launched the Galaxy Bitcoin Funds, which provide simple and secure bitcoin exposure for institutional and accredited investors. They currently manage over $350 million in assets.
Blockchain is a proven technology of peer-to-peer networks actively used today by some of the largest institutions in the world to digitize their businesses and improve efficiencies. In order to transact within a decentralized environment via any blockchain technology, cryptocurrencies are required. Many cryptocurrencies are used as a means of exchange, while bitcoin is widely regarded as a store of value and an alternative to other hard assets such as gold. The IRS classifies cryptocurrencies as assets, and it’s perfectly legal to use bitcoin to transact business.
As more and more mainstream companies embrace digital assets and invest in infrastructure to support it, the overall system should become safer and company values within this asset class should increase. Fidelity now offers custody of cryptocurrencies, for example. Facebook recently announced Libra, a new cryptocurrency set to release in 2020 to facilitate global payments and empower consumers with 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 quite outspoken on his disdain for cryptocurrencies, calling them “an elusion,” and claiming he will never invest bitcoin.
While skeptics sideline their investments, Novogratz points to younger generations that maintain a higher comfort level in the digital ecosystem and who are actively investing in bitcoin, blockchain companies, and modern payment platforms. Novogratz further points to the asset class as a whole as being non-correlated with equity and bond markets, adding diversity to portfolios and thus lowering overall portfolio risk. A macro hedging expert, Novogratz is no stranger to risk, and considers bitcoin and the entire digital assets universe an opportunity with many unknowns. As investor education, transparency, custody and access points improve, Novogratz plans to participate by investing methodically and wants to bring his investors along with him.
For more information on Galaxy Digital, watch the recent RIA Channel webcast: Diversifying with Digital Assets.