Michael Novogratz, the founder of Galaxy Digital Holdings, believes the downfall of FTX and several other major crypto companies is imminent in the near future. He said the insolvency of Sam Bankman-Fried’s crypto exchange could result in more companies facing severe liquidity problems.
Novogratz’s firm had disclosed a $76.8 million exposure to FTX because it used the crypto exchange to hold assets. It had previously said that $47.5 million worth of assets were in the withdrawal process when it highlighted its third-quarter results. Moreover, Galaxy’s net comprehensive loss was $68.1 million. This is in comparison with a $517.9 million gain in the same period a year ago because of unrealized losses on investments as valuations dropped.
The billionaire said they have to be nimble and agile for the next two to 12 weeks as this settles down and people make sense of what really happened. Novogratz believes crypto prices, within a quarter, would not be impacted by the fallout of FTX and would be more correlated to macro market conditions.
Despite the turmoil in the global crypto industry, Novogratz remains a proponent of crypto. He advised investors to maintain a diversified portfolio, take profits along the way, have a risk-management framework, and understand that all investments happen in a macro framework. The billionaire said future investors should risk only what they can afford if they want to avoid financial train wrecks of this sort. Novogratz feels it’s important that less experienced market participants only risk what they are comfortable losing.