Cryptocurrency Market Will ‘Run in Circles’ without Institutional Investors, Former Hedge Fund Manager Mike Novogratz Says
Even though cryptocurrency has seen a surge in public and government interest since the start of the year, Hedge fund billionaire Mike Novogratz still believes the market will continue to run in circles without institutional investors.
Speaking at the Beyond Blocks Conference in South Korea recently, founder of the Galaxy Digital crypto investment firm and former Wall Street executive Mike Novogratz said it will take 5 to 6 years before blockchain and cryptocurrency will go mainstream.
According to a report by blockchain and tech news outlet Blockt, Novogratz’s estimate is based on how long it will take for crypto infrastructure, including regulations, to develop to a satisfactory level and for institutions to start moving into the space in large numbers.
The billionaire indicated that institutional interest will be the driving force behind adoption, but at the end of the day, he noted, cryptocurrency is focused on individuals and reliable regulation is needed to protect retail speculators as they get involved.
“You won’t see mass adoption until the user experience does not feel like something new and that is still five to six years away,” he said.
The first stepping stone, Novogratz emphasized, will be an increased interest from institutional interest, which many believe is already well underway as banks, including Novogratz’s former employer Goldman Sachs, have started to push at the existing limits of the space.
“Think about how institutional investors operate. It’s hard to tell your boss “I have money in places you have never heard of.” You need a trusted, name custodian — a Japanese bank or HSBC or ICE or Goldman Sachs — to allow institutional investors to feel comfortable,” he explained.
“The bet I am making is that sometime in the next two to three years, a herd of institutions will come running into this space. Without that, we will be running in circles.”
Novogratz, however, acknowledged that various businesses themselves are already keenly examining the market and the underlying technology – a development he called “a sign of previous efforts bearing fruit”.
“The mission was to convert institutional investors to crypto. Now when I meet a CEO or CIO, I am surprised at how much they know. Most have not taken the first step in participating, but they are doing a lot of work,” Novogratz said.
The number of financial institutions that have indicated interest in cryptocurrencies has increased significantly during the course of 2018, especially as investors look to take advantage of the huge correction that took over the market this year.
Recently, Japanese Financial giants SBI Holdings launched its cryptocurrency exchange VcTrade for local investors. Also, the world’s largest exchange-traded fund provider BlackRock has announced its plans to form a special working group that will investigate the crypto market and estimates the company’s potential involvement in Bitcoin.