Mike Novogratz: crypto industry looks like a bunch of idiots

Renowned crypto investor Mike Novogratz, founder of Galaxy Digital Assets Fund, said the recent chaos in the crypto markets has made the entire industry look like “a bunch of idiots”.

Mike Novogratz comments on the crypto market after the recent drop

He said this during an interview yesterday at the Bloomberg Crypto Summit. 

Indeed, what happened between May and June, with the implosion of Terra and the failures of Three Arrows Capital (3AC), Celsius and Voyager, really exposed an underlying weakness resulting perhaps not only from recklessness, but also from financial naiveté and incompetence. 

Novogratz admitted that this was all due to the implosion of the Terra ecosystem, which he himself had been very supportive of in the past, and that is perhaps why he has a particularly bitter taste in his mouth. 

For what it’s worth, he has regretted supporting the Terra project, so much so that he said in a letter sent to shareholders in May that his tattoo with the effigy of LUNA will serve as a constant reminder in the future that risky investments require humility.

As far as Terra is concerned, Novogratz now speaks openly of a “bet” and no longer of an investment, admitting that such a bet very quickly proved unsuccessful. He also stated during the interview that one lesson the markets have learned from all this is that many retail investors have an extremely weak and foolish concept of risk management.

This, however, also partly related to several companies, including most notably 3AC, Celsius, and Voyager, which are crypto lending companies that have over-indebted themselves and inevitably went bankrupt.

He called these strategies greedy and ignorant, so much so that he speculated that 3AC’s behavior may even have been illegitimate, if not outright fraudulent. 

Retail investors lose confidence in the industry 

According to Novogratz, these losses have caused tremendous damage to the confidence of the crypto sector, scaring away retail investors. 

He concluded by saying: 

“It’s frustrating as heck because at times the whole industry looks like a bunch of idiots”.

However, while there was probably a lot of financial ignorance on the part of those who created the weak and unsustainable Terra ecosystem, since they were people with little valuable experience in financial markets, those who managed funds like 3AC, or companies like Celsius, should have had quite a bit of valuable experience in financial markets. So perhaps in these cases, it was not ignorance but greed, if not even, as Novogratz speculates, something worse. 

Indeed, several doubts had been circulating for some time among those with more experience in financial markets as to whether, for example, the Celsius project could really remain sustainable in the medium to long term. The fact that they decided to go ahead anyway, despite the obvious risks, casts many shadows on the management of the project itself.