Closely watched cryptocurrency investor Michael Novogratz said Wednesday he was “skeptical about a soft landing” given the challenge of undoing the massive amount of stimulus pumped into the system during the pandemic.
“We had one of the great asset bubbles of all time, fueled by the greatest monetary injection of all time, and it feels like it would be too easy to get out of it with a soft landing and a 20% pullback in the S&P,” the founder and CEO of Galaxy Digital (OTCPK:BRPHF) told CNBC.
Novogratz noted that the current market has been boosted by retail traders, who continue to show resilience even after the sharp declines seen earlier this year. The investor attributed this to the large nominal level of GDP reached in the wake of the pandemic, which put “money in people’s pockets.”
The influence of retail traders can be seen in the recent rebound in crypto, as well as in the return of meme stocks, Novogratz argued.
Recently, the market experienced a resurgence of meme-stock headlines, led by an apparent short-squeeze in Bed Bath & Beyond (BBBY), which posted two consecutive sessions of 30%+ gains on Friday and Monday.
There has also been substantial volatility in other traditional meme names, such as GameStop (GME) and AMC (AMC), as well as in stocks like Express (EXPR), Overstock.com (OSTK), HEXO Corp. (HEXO) and Wayfair (W).
Turning to cryptocurrencies, Novogratz said a “forced deleveraging” contributed to the sharp decline the market saw in the second quarter, which he hopes is the worst the asset class will ever see.
At this point, the famed crypto investor believes this forced leveraging is over. Meanwhile, he sees enticing long-term opportunities for names like Bitcoin (BTC-USD) and Ethereum (ETH-USD).
For Ethereum, which Novogratz calls his highest-conviction bet in the space, the investor expects a boost from the crypto’s transition from proof-of-work to proof-of-stake.
Meanwhile, Novogratz said the Bitcoin narrative “is one of adoption” with a “steady march” of new converts to the cryptocurrency. As such, he believes Bitcoin “remains a really good macro asset.”
For more on the upcoming merge for Ethereum, read a deep dive from Seeking Alpha contributor John Miller, who provides a guide on how to play a series of macro influences on the cryptocurrency.
