Key takeaways:
Galaxy Digital’s founder and CEO, Mike Novogratz, has forecasted a rough road ahead for crypto hedge funds. According to Mr. Novogratz, two-thirds of the existing hedge funds invested in the cryptocurrency industry will fail due to the ongoing Bitcoin and crypto bear market.
He spoke at the Piper Sandler Global Exchange and Brokerage Conference on Wednesday, where he explained that of the estimated 1,900 crypto hedge funds, 66% would go out of business. He said:
Volume will go down, hedge funds will have to restructure.
There are literally 1,900 crypto hedge funds. My guess is two-thirds will go out of business.
Mr. Novogratz further explained that the crypto hedge funds’ potential collapse would be due to the broader macroeconomic environment beginning with the US Federal Reserve withdrawing its intervention in stimulating the economy. Furthermore, last month’s collapse of TerraUSD (UST) and Terra (LUNA) has applied additional selling pressure to the crypto markets.
Concerning UST and LUNA, Mike Novogratz explained that the project was not strong enough to handle the effects of a Bitcoin bear market. He explained:
It wasn’t strong enough to deal with the headwinds of Bitcoin prices going down, crypto prices going down. It was a catastrophic loss.
The CEO was unbelievably bright and charismatic and there was a tremendous amount of momentum behind what he was doing.
He also highlighted that Galaxy Digital would continue to hire bright minds despite the ongoing Bitcoin and Crypto bear market.