"It's going a lot, lot higher"
- Mike Novogratz on the price of bitcoin, Nov. 27, 2017
On October 10, pioneering cryptocurrency investor Mike Novogratz told CNBC that he expects bitcoin will top $10,000 in the next six to ten months; on that day Bitcoin was trading around $4,870. A little over a month later Novogratz got a nice birthday present: on Sunday, with Bitcoin trading just shy of $10,000, the former Fortress hedge fund manager's bitcoin price target was reached in just a few short weeks, prompting the following tweet: "#bitcoin over 9k and #ETH over 460 is a pretty nice way to wake up on my birthday."
Bitcoin's remarkable, exponential surge only accelerated after a mid-November plunge of more than 20% when Novogratz bought $15 million to $20 million worth of the digital currency, in the process acting as the first quasi-central bank price stabilizing agent. Since then, Bitcoin has only shot ever higher, and reached an all-time high of $9,800 on Monday (and trading above $10,000 on South Korean exchanges) at which point it was up more than 10x for the year and about 50% higher for November.
And, if Novogratz is right - again - it has a long way to go.
Speaking to CNBC's Fast Money, Novogratz raised his price target aggressively, and predicted that bitcoin could quadruple in price by the end of 2018.
"Bitcoin could be at $40,000 at the end of 2018. It easily could," Novogratz said. As for "Ethereum, which I think just touched $500 or is getting close, could be triple where it is as well."
Novo's comments came as the market capitalization of all digital coins on CoinMarketCap hit a record $304 billion Monday, although that too could be just the start: Novogratz said he expects that could increase by about six times to $2 trillion at the end of next year.
"There's a big wave of money coming, not just here but all around the world," said Novogratz who plans to launch a $500 million digital assets fund through his new firm, Galaxy Investment Partners. He's right about the influx of funds: demand from Asia, or almost exclusively Japan and South Korea since China halted all exchange-based crypto trading, has been the biggest contributor to bitcoin's gains. Japanese yen trading in bitcoin - seen by many as an offshore proxy for Chinese buyers - dominates trading volume at about 62%, according to CryptoCompare. U.S. dollar-bitcoin trading accounts for about 21%, while trading in South Korean won accounts for about 9%.
While Novogratz' bullishness is hardly surprising - he is after all talking his book - he did make a good point: no matter how great the demand, the supply of cryptos remains fixed.
"What's different about these coins than other commodities ... there is no supply response here," Novogratz said. "So it's a speculator's dream in that as buying happens there's no new supply response that comes up. So every price move gets exaggerated. It's going to get exaggerated on the way up. There will be 50 percent corrections. It will get exaggerated on the way down."
That mush is true: as we showed last week, bitcoin crashes roughly once per quarter suffering a dramatic double-digit decline, although as some have pointed out, in recent quarters the crashes have become more modest. More importantly, so far every dip has been furiously bought.
Novogratz also said that in contrast to oil and renewable energy products, companies cannot produce more bitcoin in order to meet demand since the digital currency's supply is limited to 21 million coins.
And speaking of talking his book, Novogratz is certainly putting his money where his mouth is: he told CNBC that "probably over 20%" or "maybe even 30%" of his net worth is in cryptocurrencies, split roughly in half between bitcoin and ethereum. That allocation is not for everyone, however, and Novogratz doesn't recommend retail investors put any more than 1 to 3% of their net worth in cryptocurrencies, or wealthier investors to put more than 5 to 10%.
Novogratz is not the only one to revise his price target as bitcoin shoots higher: last Wednesday, Fundstrat's Tom Lee raised his mid-2018 price target for bitcoin to $11,500 from $6,000. That followed a similar upgrade last Monday by Standpoint Research's Ronnie Moas, who raised his 2018 price target for bitcoin to $14,000 from $11,000.
Following Novogratz' comments, Bitcoin was trading at $9,780 late on Monday, its all time high.
On monday, Ethereum hit a record high of $493.40 Monday, and was last trading at $478. If Novogratz is right, its price will be around $1,500 in roughly one year's time.