Mike Novogratz, head of crypto merchant bank Galaxy Digital (CVE: GLXY) sees a positive future for crypto and recently made a $20k bitcoin forecast in 2019 to the Financial News (paywall) then put his money where his mouth was when his firm took part in an $80 million funding round for crypto miner Bitfury.
Even the most conservative interpretation of that forecast which would see bitcoin hit $20k by the end of 2019 would see a fairly aggressive increase in the price of bitcoin over next year.
Novogratz’s $20k Bitcoin Forecast
Source: Yahoo Finance (Bitcoin price YTD)
Novogratz Believes Institutional Money will Fuel his $20k bitcoin forecast in 2019
Novogratz has a history of making bold statements about the price of bitcoin and this time sees the increasing institutional interest in cryptocurrencies as the catalyst for these increased price targets.
With the recent announcement of institutional crypto custody and trade execution from Fidelity Digital Assets and the highly anticipated launch of bitcoin futures on the Intercontinental Exchange’s (ICE) Bakkt platform, institutional investors are starting to take notice.
According to the Financial News piece, Novogratz believes that seeing more and more of the large Wall Street players building up frameworks and platforms for the trading of crypto will trigger institutional investors to jump on the bandwagon.
If there is a bandwagon then Novogratz and his firm, Galaxy Digital are making sure they aren’t the last ones on.
Exciting news. We are thrilled to announce #GalaxyDigital as @Fidelity @DigitalAssets’ alpha crypto custody client #theherdiscoming https://t.co/87yeysYSFM
— Michael Novogratz (@novogratz) October 15, 2018
Excited Galaxy is part of this project. In my opinion, this is the most important news in crypto this year. Consumer adoption, Institutional custody, a clearing house, and a new major player in the exchange game. The herd..
— Michael Novogratz (@novogratz) August 3, 2018
Bullish Novogratz Continuing to Invest for the Long-Term in Bitcoin Businesses
The timing of the splashy $20k bitcoin forecast from Novogratz may not have been coincidental as his firm was also in the news recently for participating in an $80 million raise from crypto miner Bitfury. If Novogratz truly believes that bitcoin is going to take off in 2019 and breach its previous highs then interest in a bitcoin mining firm makes a lot of sense.
Once self-styled as the merchant bank of crypto, Galaxy Digital’s Principal Investments business participated in the financing round for Bitfury that reportedly valued the crypto mining firm at $1 billion.
Bitfury primarily designs and sells cryptocurrency mining equipment used to validate transactions on the blockchain. They are one of the larger competitors of Chinese-based crypto mining giant Bitmain who currently dominates mining equipment manufacturing and bitcoin mining pools.
Novogratz and Galaxy Digital are no strangers to Bitfury and their business, as they are also investors in crypto mining operator Hut 8 who have an exclusive partnership with Bitfury in North America. In fact, Novogratz sits on the board of Hut 8 along with Bitfury founder and CEO Valery Vavilov and Bitfury board member Bill Tai.
The investment in Bitfury comes at an interesting time as competition in the crypto mining industry heats up, with new generations of equipment promising better efficiency and larger hash rates being released by many of the top equipment manufacturers including Bitmain.
However, industry leader Bitmain has come under some scrutiny after reportedly suffering big losses in the second quarter of 2018 and concerns about the company’s large holdings of Bitcoin Cash have surfaced.
All this adds up to an opportunity to enter deeper into the crypto mining space for Galaxy Digital and Novogratz. If Novogratz’s $20k bitcoin forecast comes true due to increased demand from institutional investors, then mining firms such as Bitfury and Hut 8 will see even higher profits due to increased mining demands as well as the higher price of the asset they generate.
One thing is for certain, Novogratz needs to find something to improve his return on investment. Since Galaxy Digital started trading in August 2018, its stock has significantly underperformed even compared to the very things the firm has invested in.
Relative Performance of Galaxy Digital, Hut8 and Bitcoin since Galaxy Digital started Trading
Source: Yahoo Finance
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