Billionaire investor Mike Novogratz is betting that the stock market is about to go lower. More importantly, he’s standing his ground on Bitcoin and staying long, meaning he thinks there’s plenty of room for the price to go up. Novogratz says the reason for that is because he’s seeing more and more adoption of digital currencies in the United States and Europe. More importantly, he’s also seeing more and more high net-worth individuals, hedge funds and institutions getting involved than ever before.
Novogratz is in a camp with many other investors who agree with him. Aside from the fact that the coronavirus pandemic has its firm grip on the stock market, and governments all around the world are dishing out trillions of dollars in stimulus packages and financial aid in order to prop up businesses big and small, Bitcoin’s next halving event is about a month away. It means that the new supply of Bitcoin coming into circulation is literally about to cut in half yet again.
Why Go Long On Bitcoin?
Novogratz believes that like any other store of value, in order for Bitcoin to keep rising in price, people have to agree that it has value. In a traditional economy backed by fiat money that is controlled by governments, paper money is merely deemed legal tender. In fact the word fiat comes from a Latin term that loosely translated means ‘to agree upon’. What this means is that from a fundamental perspective, paper money only has value because governments continually agree that it does. Even though major media outlets will have people believe that it’s all based on oil or gold or some other commodity, the truth is it’s all just based on a global agreement.
Take a moment to put that into the context of Bitcoin being a store of value. Bitcoin is controlled by a public ledger which is secured by a network of nodes/computers owned by individual participants. Anybody can participate, and there is no need for a government to oversee a legal agreement that makes it fair game. The people themselves are in control.
This means that the only way to prove Bitcoin is a store of value is that people have to willingly enter into such an agreement. Not so much with a legal contract, but with their willingness to adopt cryptocurrency and actually use it.
The bottom line is Novogratz believes there is much more room to grow and more and more people will continue to adopt cryptocurrency. He clearly thinks the coronavirus pandemic and the economic situation surrounding it will help spur that adoption in the long run.
So Why Short The Stock Market?
Consider that in mid-March, around the same time that Bitcoin’s price plummeted to nearly $3,000 USD, the S&P 500 dropped down from 3,000 points to nearly 2,000 points in relatively short order. The S&P 500 is essentially an index that couples together the stock prices of the top 500 wealthiest companies in the world. The total value of the companies listed on this index is worth between $25-$30 trillion at any given time. With that kind of a valuation, it’s easy to see why the S&P 500 and other indexes are looked at by economists and investing experts alike when trying to determine when the next recession or even depression is going to hit.
Not only that, but when the powers that be in centralized governments, like President Donald Trump, see that wealthy corporations are about to lose big money, they aim to stimulate the economy with trillions of dollars in manufactured wealth.
Novogratz and many other investors know that as long as people are losing their jobs in record numbers, the house of cards eventually has to collapse again. Whenever an economy collapses, shorting the market lets smart, wealthy people like Novogratz profit on the way down. That is the whole point of short selling after all.
The Blockchain is the Silver Lining
Like any other investing decision, Novogratz’s choice represents a calculated risk. But given that among the world’s wealthiest people he is one of the earliest adopters of cryptocurrencies and holds a significant amount of his net worth in various projects, it’s safe to say that Novogratz believes the blockchain will benefit from the current state of the economy for years and years to come. That of course means that the price of Bitcoin is likely to go up long term.