Novogratz admitted he was “darn wrong” about the crisis and accused the SEC
The recent turbulence in the crypto market is forcing many investors to reconsider their attitude toward virtual currencies. Well-known crypto enthusiasts, including Michael Novogratz, are no exception.
The billionaire CEO of Galaxy Investment Partners remains cautiously optimistic about the future of the crypto industry but also begins to admit his own mistakes.
During the Bloomberg Crypto, the trader stated that the recent events in the crypto market related to the Terra USD collapse are a “full-fledged credit crisis.” In his opinion, the main surprise to most investors was the size of the losses that were formed by the largest crypto companies and causing a cascade of further crashes.
I was darn wrong because I didn’t realize the magnitude of the leverage in the system.the billionaire admitted his mistake.
It’s worth recalling that Novogratz became one of the investors of the Terra ecosystem and for a long time had been actively promoting the cryptocurrency Luna. Moreover, he made a tattoo dedicated to it and considered himself a “lunatic”.
The crypto industry looks like “a bunch of idiots”
As a result of the sharp decline of Terra USD, not only the ecosystem itself but also the major players in the market suffered. Specifically, we’re talking about the bankrupt crypto lending platform Celsius Network and cryptocurrency hedge fund Three Arrows Capital.
Novogratz believes that because of the irrational actions of representatives of the ecosystem and key companies, the entire industry looks from the outside as “a bunch of idiots.”
According to the billionaire, the situation with Terra could have been predicted. This allows one to conclude that the heads of the affected companies were very short-sighted. The margin trading also played against the market participants. Too active fondness for it became one of the reasons for a large number of bankruptcies.
Is strict regulation unavoidable?
Investors should treat the situation as a useful, albeit painful, lesson and pay close attention to studying potential risks.
People usually understand where they invest if they pay attention to it. Betting on Terra didn’t work, and the ecosystem collapsed quickly. But this is a simple lesson – industry participants and retail investors have very little understanding of risk management. The companies that went bankrupt during the market crash were simply too greedy.
Novogratz didn’t forget about regulators, blaming them for inefficiency: “I don't know what the SEC should have done or could have done or might have done, but they didn't do a lot to protect retail investors.”
Even before the crisis in the crypto market, the trader expressed the need to regulate the industry. Last summer, for example, he insisted on greater control of the cryptocurrency sphere. Novogratz was confident that strict regulation would help investors learn more about digital assets and allow the assets themselves to achieve fast growth.
Without sufficient awareness of the nature of cryptocurrency and possible risks, it is almost impossible for many investors to avoid losses. The billionaire reported that even his cardiologist was a victim of crypto winter and lost a million dollars.
Now I’m worrying about his heart instead of him worrying about my heart. No one reads the fine print – he assumed it was like a bank account and I was like, ‘Oh, dude.’ So the disclosure amongst taking retail deposits should be much, much higher.
But even the chaos in the crypto market and the financial losses of the participants do not deprive the trader of cautious optimism. He’s confident that the industry has already survived the most severe upheavals, and BTC will approximately grow to $500,000 in the next five years.