Galaxy's Novogratz: Macro factors, ‘boomer’ wealth to spur more crypto adoption

The approval of a bitcoin ETF is likely just the start of accelerated crypto adoption, according to Galaxy Digital CEO Mike Novogratz — particularly as the US debt level rises and the Bitcoin halving looms.

Still, regulatory hurdles for the segment remain, the executive noted.

Novogratz pointed to the US’s national debt of more than $34 trillion — a number that has risen by about $1 trillion in the last few 100-day periods.

“Until the United States and other countries get their…finances in order, the story for bitcoin and other digital assets is going to continue to grow,” he said during the company’s Tuesday earnings call.

Bitcoin (BTC) which has a finite supply, has historically acted as a hedge against currency debasement. Its price rose above $71,000 on Tuesday morning. BTC stood at roughly $70,400 at 12 pm ET — down nearly 5% from its all-time high set earlier this month, but up 4% from a week ago.

“The [crypto] story’s powerful right now, and it’s got a whole new set of salespeople,” Novogratz added. “With the [bitcoin] ETF, we’ve opened up the $80 trillion baby boomer giant bulk of wealth in the United States.”

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Galaxy launched a spot bitcoin ETF with fund giant Invesco in January. The Invesco Galaxy Bitcoin ETF (BTCO) was one of 10 such US products to launch at that time, and the segment has so far notched about $11.3 billion of net inflows.

BTCO managed $383 million in assets, as of market close Monday, according to BitMEX Research data. Funds by Grayscale Investments, BlackRock and Fidelity dominate the segment, accounting for nearly 90% of the category’s roughly $58 billion in assets under management.

The fund by Galaxy and Invesco was one of four ETFs approved earlier this month by Cetera Financial Group, a wealth management firm with $190 billion assets under management, as of Dec. 31.

“It’s only been two months since the regulatory green light, and these products take time to attract assets,” Galaxy Digital president Chris Ferraro said on the earnings call. “We’ll need to allow the market dynamics to play out, but we are particularly excited by the long-term potential for adoption within the US wealth channel.”

Easier access to bitcoin via the ETF is set to coincide with the bitcoin halving next month — when per-block mining rewards are set to drop from 6.25 BTC to 3.125 BTC. Such an event creates “a good supply-demand imbalance,” Novogratz added.

While the Securities and Exchange Commission’s approval of bitcoin ETFs legitimized that asset for a new segment of investors, “the rest of crypto is still a regulatory tug of war.”

The SEC is set to rule on spot ether ETFs in May, though many industry watchers are bearish on the possibility of those getting cleared to trade.

While the SEC has let bitcoin-focused companies go public in the US, Novogratz said, the SEC has not yet allowed Galaxy Digital to do so. The company will continue toward that long-time goal despite what executives have so far described as a “frustratingly slow” process.

Novogratz said until there is a change in SEC leadership — the firm “can be hopeful, but not optimistic” of getting cleared to become a US public company.

The upcoming presidential election in November is likely to spur leadership turnover at various government agencies, no matter who wins, the Galaxy executive added.

“A year from now — assuming I’m right and we get legislation passed in the US and a different tone out of the SEC — this industry’s going to be a lot bigger,” Novogratz said.

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