It’s Crypto’s Moment to Shine Amid Global Banking Fiasco: Novogratz

• As chaos rips through the banking sector, Mike Novogratz said the case for crypto is more prominent now.
• Banks have been on a “debt orgy,” the Galaxy boss said, leaving customers exposed.
• Novogratz added that the government can “debase fiat currency” but cannot do the same with bitcoin.

Galaxy Digital CEO Mike Novogratz said the bull case for cryptocurrencies is even more prominent now as turmoil in the banking sector continues to unfold.

The spate of bank failures over the past month has highlighted weaknesses in the traditional monetary system and bitcoin’s ability to eliminate many of its financial problems, he said at the FII Priority Summit.

“In many ways, this is crypto’s moment,” Novogratz said.

He alluded to bitcoin’s oft-cited use case as an inflation hedge because the crypto’s limited supply of 21 million will help it retain its value.

And unlike the Federal Reserve in the United States, the digital currency is a peer-to-peer transaction system on a public ledger that lacks a centralized authority, making it less subject to decisions from a single source.

“We just had a banking crisis in the US, didn’t we? Satoshi started the Bitcoin White Paper because he saw populism coming,” Novogratz said, referring to the 2008 writing of crypto’s pseudonymous founder. “He didn’t trust [that the] governments could control themselves so that they would use and use and would debase fiat currency.”

In theory, the government cannot devalue the currency because there is no single authoritative body. Users can also hold crypto in a digital wallet and avoid the risk of bank runs.

“We just had an episode where we looked around and we said, ‘Oh my God. Our regional banks [and] our money-centric banks have all been on this orgy of debt.’ [They’ve had extremely] low interest rates for too long,” he said. “There are trillions of dollars of bad debt out there.”

Silicon Valley Bank’s failure earlier this month highlighted the massive unrealized losses on the balance sheets of other banks, which bought up government-backed debt and saw their value fall as the Fed raised interest rates.

On the other hand, government intervention and regulation can help investors recoup losses. If it’s a fraudulent project or an insolvent crypto exchange like Sam Bankman-Fried’s FTX, the Federal Deposit Insurance Corporation won’t be able to step in and stop customers.