Galaxy Digital’s Novogratz says US ‘debt orgy,’ banking crisis prove crypto thesis

The U.S. banking crisis has acted like an «adrenaline shot» for crypto and given the bitcoin community «unbelievable resilience,» Galaxy Digital CEO Michael Novogratz said.

«There is nothing like a banking crisis in the United States … to remind you that our systems are fragile, Novogratz said during Galaxy Digital’s fourth-quarter earnings call. «We have been on a debt orgy, literally, gorging ourselves with cheap money for years.»

The company reported a net loss of $1 billion last year, missing analyst estimates. It reported a net profit of $1.7 billion in 2021.

Galaxy Digital expects to turn a profit in the first quarter of 2023 and achieve positive gains for its balance sheet after recent bank collapse kickstarted a price rally in crypto assets. Galaxy saw some of its best volume days in the past weeks, said Chief Investment Officer Christopher Ferraro, adding that the company had multiple banking providers and acted as a «pretty important liquidity center.»

BTC/USC chart by TradingView

«Crypto was in lots of ways created for this point,» Novogratz said. «Satoshi Nakamoto, way back in 2009, worried about the breakdown of the legacy financial system … Bitcoin really is the first decentralized store of value or money, which then really gave birth to this whole industry.»

The CEO believes that 2023 will bring with it big macro tailwinds for crypto.

The good, the bad and the ugly

If price action represents the good — coupled with overseas adoption of crypto in places like Hong Kong — then the current regulatory environment in the U.S. is the bad, Novogratz said.

The ugly would be Galaxy Digital’s share price, which has dropped more than 80% over the past year, according to TradingView.

«It’s lower with Bitcoin higher and it’s lower with our company doing better,» Novogratz said. «We have an operating business that I think will make money or at least break even this year and if not, should come close.»

The company plans to buy back stock starting May 15.

Galaxy Digital share price chart by TradingView

Novogratz on regulatory enforcement

The U.S. Securities and Exchange Commission last week said that it was investigating Coinbase and on Monday the Commodity Futures Trading Commission announced it was suing the biggest crypto exchange, Binance, for allegedly violating U.S. laws. This follows other regulatory actions like the SEC’s probe into former BUSD issuer Paxos.

«The regulatory regime in the United States is very tough,» Novogratz said. «It was making lots of progress until FTX and then the Democrats felt foolish that they were so close to Sam Bankman Fried — from the SEC to the CFTC to the Biden administration — and have used this one example of horrific fraud and being snookered by a guy in Bermuda shorts to just say the whole thing is bad.»

Novogratz also pointed out that activity and prices are still moving up despite what he sees as an «attack on crypto.»

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