Investing Legend Calls Cryptocurrencies "Biggest Bubble Of A Lifetime"... But There Is A Catch

Former Fortress Principal Michael Novogratz left the firm's colossal macro hedge fund almost two years ago, but has been discussing investments in virtual currencies since 2013 when he told a UBS conference...

"Put a little money in Bitcoin...Come back in a few years and it’s going to be worth a lot."

He was of course correct, Bitcoin was trading around $200 at the time and as recently as two weeks ago was worth $3000.

But today, Bloomberg reports that at the CB Insights Future of Fintech conference in New York, Novogratz told attendees that he has cut holdings (in Bitcoin and Ethereum) after the cryptocurrencies' latest "spectacular run," warning that "Euthereum had likely hit its highs for the year," and "cryptocurrencies were likely the biggest bubble of his lifetime."

However, while this all sounds desperately downbeat, Novogratz is still very "positively constructive" on the space overall. He should be - he has 10% of his net worth invested in the sector.

As Bloomberg reports, Novogratz says cryptocurrencies could be worth north of $5 trillion in five years -- if the industry can come out of the shadows.

"The Nasdaq got to $5.4 trillion in 1999, why couldn’t it be as big?" the former hedge fund manager said in an interview, referring the Nasdaq Composite Index.


"There's so much human capital and real money being poured into the space and we’re at the takeoff point."


To get there, though, companies need to develop sound business principles to satisfy regulators and lend legitimacy to the budding industry, as Novogratz says cryptocurrencies face "monster regulatory risk."

Novogratz said he took some profits on his bitcoin and ether holdings as prices surged, but still has 10 percent of his net worth invested in the sector, including blockchain-based assets he bought in fundraising mechanisms known as initial coin offerings.

He’s looking to add more ether if it falls between $200 and $150...

and more bitcoin if it falls to $2,000...


Novogratz ended with some more serious advice...

"Pay your taxes, because nobody in that space pays taxes. It’s a bunch of libertarians," he said, adding he thought a core group of developers have good intentions.


"There really is a revolutionary spirit amongst the guys that are building this system."

Concluding that Bitcoin could become a viable store of wealth, similar to gold, while ethereum could be the platform underpinning the Googles and Facebooks of the future, while money transfers to securities settlement will probably be done using blockchain technology.


ultraticum dussasr Tue, 06/27/2017 - 17:57 Permalink

At least this one of many price prognosticators has been around for a while and seems to understand the Bitcoin developer community (libertarian).I get tired of such-and-such forex or gold trader spouting off about Bitcoin when they have absoltely zero clue about where it came from, its basic security features, or how to make a transaction (makes me doubt any credibility I formerly put into their analysis).

In reply to by dussasr

MalteseFalcon ultraticum Tue, 06/27/2017 - 18:20 Permalink

"There really is a revolutionary spirit amongst the guys that are building this system."Yeah, no doubt.A bunch of libertarians for sure.Turn the clock back to 1994 and the internet was deeming with revolutionaries and libertarians.Then came Google, Facebook, EBay and Amazon.The revolutionaries and libertarians got slaughtered in the tech bubble and then lost their jobs to H1-B visa invaders.The winning virtual coin has yet to emerge.And in any case I'd rather own the company and not the coin.BTW, anyone want my Open Market stock?  CMGI?  LVLT?

In reply to by ultraticum

mtl4 eclectic syncretist Wed, 06/28/2017 - 09:44 Permalink

The entire reason for Bitcoin's rise is the giant bubble in government (which caused money to look for cover when normally it would simply go back to cash as protection, this creates a demand).  The new world of bail-ins have erroded faith in all governments as well as banks but again this is why the idea of peer-to-peer money is attractive just as it was for file sharing back in the 90's (very hard to target).  The problem now is that it is still in its infancy so governments are allowing it to move along as an experiment (hence why Russia was interested) but it's only a matter of time before critical mass will have central banks start messing with that market too (if they haven't already, remember fungible is a weakness in this context) just like they have in all the other trading markets.  So again the real issue is to be able to have a peer-to-peer financial system that operates without external distortion from gov't/CB's/big business.  I suspect it may even come down to localized digital curencies which allow communities to be able to decentralize the system (what libertarians are really after anyway).  How that will look in the end is anyone's guess.

In reply to by eclectic syncretist

aminorex King of Ruperts Land Tue, 06/27/2017 - 22:24 Permalink

Bitcoin lacks an essential property of money: fungibility.  Because Bitcoin has a history, one Bitcoin is not the same as another in the eyes of the law.  So far this has not been a problem but when it is, it will be a very big problem.  Ethereum is superior as a platform for programmable contracts, but again can never be money.  No "coin" which is an application  platform can be money.  The only counterparty-free, pure digital cash with usable liquidity today is Monero.  Everything else fails the money test.  They can be many things, some useful, some just Ponzi scams, but no other cryptocurrency is worthy of the name "currency", because nothing else is non-inflationary hard money with anonymity built in to the basic protocol.  The first violator of Chinese capital controls using Bitcoin who gets a bullet in the head in Hangzhou stadium will cut the price of Bitcoin in half, and multiply the price of Monero (xmr) to by 10x.  I know which one I want to be holding.

In reply to by King of Ruperts Land

Jubal Early (not verified) aminorex Wed, 06/28/2017 - 02:41 Permalink

That fungibility issue could be used between the (((IRS))) and the (((Tax Compliance Industry))) to track all those Bitcoin fragments and santoshi's being shot around to balance the transactions.  What if each on was a reportable event:

"Regardless of what you do with your Bitcoins (save them, spend them on goods or services, sell them) you should maintain detailed records including date of purchase, cost at purchase, fees associated with purchase, date of sale or exchange, sales proceeds or the fair value of goods/services purchased. In the event of an IRS audit your ability to produce information justifying your treatment of the items and your calculations may mean the difference between the IRS respecting capital gain treatment or rejecting it entirely and treating your Bitcoins as income with a zero cost basis"…

In reply to by aminorex

toknormal aminorex Wed, 06/28/2017 - 05:09 Permalink

The problem with Monero is that it uses encryption on top of regular cryptography. That kind of torpedoes it right there as far as any long term store of value is concerned. Blockchains are transparent for a reason - it is unbacked money. If you obfuscate them in any way, shape or form, this is what you get happening:


Encryption is ok for transient payment systems where the information is just "passing through". For an unbacked monetary store of value it's little more than a high-tech time bomb, not to mention the fact that it's 10-a-penny now and there are about 3-4 blockchains all doing exactly the same thing and nothing more.

Regarding fungibility, you could not be more wrong though. Fungibility (in a strict monetary sense) and obfuscation as opposites. For a blockchain it means that the balance at one address is equally spendable as the balance at another. Simply hiding the balance for those who don't happen to have a private key doesn't make it "fungible" it just makes it invisible...i.e. a kind of 'scam' fungibility like saying all the clothes in my wardrobe are the same colour cos I can't see them.

Bitcoin is anonymous by default, that's where it gets its fungibility from. Any de-anonymisation has to occur from information gleaned off-chain. Simply linking two addresses does not de-anonymise a user since as soon as a new address is created it's not possible to know who the keyholder is for that second address.

Sure, off-chain information combined with on-chain observations can lead to identification of certain holders. But it does not justify obscuring the chain since transparency represents its entire value basis.

In reply to by aminorex

Eager Beaver MalteseFalcon Tue, 06/27/2017 - 21:04 Permalink

Oh yeah, genius? Is that how it played out? For you, maybe. Not all of us made the same stupid moves you did. Some of us saw the writing on the wall. I sold my Netscape options at the top, right after the announced AOL merger, maybe you bought some? Then I went to work for $150-300 / hour, alongside the H1-B's, paid off all the debt, put what I didn't need to travel into Gold. Sold a little of that at ~$1900, enough to buy a big 'ol "pile" of Bitcoins. Haven't worked a "real" job since 1998. Oh, those whacky Interwebs...down vote away, bitchez! Ahahahahahahaha!

In reply to by MalteseFalcon

aurum4040 MalteseFalcon Wed, 06/28/2017 - 06:19 Permalink

You'd rather own the company than the coin...This is where you fail. You failed to take the time to research and understand the breadth of cryotos, specifically platforms. For example Ethereum. This is also where you obviously have no clue about developing software, BIS,  applications etc. Ethereum is effectively many, many companies with more potential then any organization or business concept to date. Would you rather own a company limited by it's own vision or an entire concept with limitless scope? Would you rather own AOL or Web 3.0? Uber or the code that replaces Uber and every other company remotely similar? - and I am just referring to one sector. Would you rather own the grease that will make the financial markets tick or a company who distributes said grease? Theres a reason why 200 top organizations worth trillions of dollars are backing Ethereum... which was invented by the same man who founded PayPal. Sad thing is 13 people upvoted you and you have no idea what you are talking about. Do some research, take this comment as some ZH tough love, and buy Ethereum if and when it gets close to $200 again. And consider buying a small amount of cryptos of companies who are utilizing the Ether platform to change the world. Like Gnosis for example -reward incentivized predicative analytics...which will drown out bad analysis in just about every form. 

In reply to by MalteseFalcon

MalteseFalcon aurum4040 Thu, 06/29/2017 - 06:09 Permalink

Nobody has sufficient idea what they are talking about.While no doubt you've spent lots and lots of time reading lots and lots of technical and marketing information about any number of virtual currencies, you still have no idea what will happen when they are released into the real world.Did you for see the Ethereum flash crash?No, you didn't.Did Netscape anticipate Google Chrome?MySpace or Faceboook?Lycos or Google?The early adopters of the eventual 'winning coin' will gain through luck as much as anything.No one ever notes the people who went with an alternative and got nothing.

In reply to by aurum4040

shizzledizzle Tue, 06/27/2017 - 17:49 Permalink

"The Nasdaq got to $5.4 trillion in 1999, why couldn’t it be as big?" The Nasdaq was sugar on the central banks cornflakes... Crypto is pissing in them. 

Crypto-World-Order (not verified) Tue, 06/27/2017 - 17:51 Permalink

Ether is going to get the kinks worked out. Today we are seeing some stabilization. Great gains if you bought Either at 211 or so. BTC will go back to 2600 this week as well. Bitchez gonna hate but fuck um', they are broke anyways

jeff montanye aminorex Wed, 06/28/2017 - 04:35 Permalink

and where to rank those gold and silver coins and ingots, cooly independent of man and his machinations, products of neutron star collisions, residing in rotting chests in the ground, scattered on sand at the bottom of the sea, packed into swiss vaults drilled into the alps, hidden behind the drywall, and on the books but not on the shelves of fort knox, west point, and the bank of england?

In reply to by aminorex

I_rikey_lice tmosley Tue, 06/27/2017 - 18:27 Permalink

Crypto has a future but it won't be  Btc or Eth or any current ones, it will be completely new "coins" controlled by governments, corporations, etc. Btc and Eth will end up being underground internet currencies for illegal activities and limited capital flight. Putin is looking at Eth but I can guarantee you it will be a completely new Eth coin that will be controlled completely by Russia. 

In reply to by tmosley