Novogratz Says the ‘Clearest Trades’ Are Long Gold, Euro, Bitcoin

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

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“The clearest trades have been and will continue to be long gold, long the euro, long Bitcoin, long Ethereum — these 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 US credit crisis, Novogratz said. That, in turn, “will slow the economy,” which would ultimately spur the Fed to cut rates more aggressively than expected, with the first lowering of borrowing costs potentially coming by the end of the year, he said.

Bitcoin would be in a “sweet spot” should interest rates drop again, Novogratz said.

“Bitcoin had a huge 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 moving towards $40,000, as long as the Fed plays out the way I think it’s gonna play out.”

Fed policymakers scaled back their expectations for rate hikes this year after a series of bank collapses roiled markets last month, and stressed they would remain vigilant for the potential of a credit crunch to further slow the economy, according to minutes of a March 21-22 meeting released Wednesday.

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As for equities, 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 value, and they seem to be expensive, so my bias is to be flat to short.”

While the US Securities and Exchange Commission is cracking down 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.

One big 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 mistakes that Binance made in the past, and Binance would pay their fines and move on,” Novogratz said, referring to “know your customer” rules. “That would be the best for the crypto community.”

–With assistance from Sonali Basak.

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