REUTERS/Rick Wilking
Billionaire investor Mike Novogratz said Thursday the surge in cryptocurrencies is serving as a referendum on the perceived ability of the Federal Reserve to manage risks facing the world's largest economy and suggested people continue to buy into bitcoin.
The US economy is in the midst of recovering from the COVID-19 pandemic, with growth aided in part by $5 trillion in fiscal federal aid issued by the government during the health crisis. The stimulus is widely expected to push consumer price inflation beyond the central bank's 2% target. The Fed has said it will tolerate higher inflation for a while to accommodate growth.
There's a "slim chance" that the Fed can "land the plane" and avoid a massive inflation spike/debt default, Novogratz said Thursday.
"The crypto markets are telling us that there is a growing probability that they won't be able to land the plane," the billionaire told the New York Alternative Investment Roundtable, a nonprofit organization that promotes best practices and education in the alternative investment industry.
"Bitcoin is a report card on how central banks and ministers of finance are doing," the Galaxy Digital CEO added.
According to Novogratz, bitcoin has spiked on two main factors: "Mass adoption, and people are scared s---less because of monetary and fiscal policy."
Bitcoin on Thursday traded around $53,000 after last week's surge to near $65,000 on the same day cryptocurrency exchange Coinbase debuted on Nasdaq.
Novogratz's comments landed on the same day that ether, the second-largest cryptocurrency, jumped to a new record high above $2,560, pushing its market capitalization near $300 billion for the first time.
"Simple advice: Buy bitcoin, buy ethereum, then do your homework on a few stocks," he said. He doesn't like crypto mining stocks because "it's just deferred bitcoin" but he understands the demand as people want to get in.
Novogratz has previously hit against the Federal Reserve, saying it has fanned a boom in speculative assets such as so-called meme stocks including GameStop by slashing interest rates which have fostered cheap borrowing and made saving less attractive.
"All of this is happening because interest rates are zero," Novogratz said this week on CNBC's "Squawk Box".
NOW WATCH: Sneaky ways stores like H&M, Zara, and Uniqlo get you to spend more money on clothes
See Also:
- A crypto VC firm's share price has surged over 28,000% since launching 5 years ago. The founders break down their 5-part investing strategy — and share how staking netted the firm $1.8 million
- Bitcoin plummets more than 10% in its biggest drop in months, just days after reaching a record high
- A millennial founder who's melding the physical art world with crypto shares 4 things investors need to know as online art sales hit record highs — and names 7 emerging artists to watch
