Novogratz Reacts to Dimon's Crypto Critique, Touts Bitcoin's Value

On 8 December 2023, Michael Novogratz, founder, chairman, and CEO of Galaxy, appeared on CNBC’s “Squawk Box” with co-anchor Andrew Ross Sorkin to discuss several key topics in the cryptocurrency space, including Bitcoin’s recent surge, the overall crypto rally, Jamie Dimon’s comments on crypto, the state of spot Bitcoin ETFs, and the outlook for 2024.

On 6 December 2023, at the Senate Banking Committee hearing titled “Annual Oversight of Wall Street Firms,” Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co., voiced a strong stance against cryptocurrencies. He suggested that the government should contemplate the shutdown of the crypto industry, citing its potential to circumvent government regulations and attract illicit activities.

Dimon stated:

“I’ve always been deeply opposed to crypto, Bitcoin, etc … If I was the government, I’d close it down.”

This perspective is consistent with his previous remarks, where he has cautioned against Bitcoin and called for more stringent regulations on stablecoins.

Amid increasing regulatory focus on the cryptocurrency sector in Washington, Senator Elizabeth Warren is advocating for the Digital Asset Anti-Money Laundering Act, as Sarah Wynn for The Block reported. This legislation seeks to expand Know Your Customer (KYC) regulations to various entities in the crypto sector.

In the course of the hearing, Warren engaged with several leading bank CEOs, including Charles Scharf of Wells Fargo, Brian Moynihan of Bank of America, and David Solomon of Goldman Sachs, querying their views on crypto regulations. All four CEOs were in agreement on the necessity of applying the same anti-money laundering standards to the crypto industry as are applied to traditional financial institutions.

Novogratz commented on the significant rise in Bitcoin’s price, which has soared over 150% this year, recently topping $44,000.

He attributed this rally to moderating US rate expectations, as evidenced by the drop in the 10-year Treasury yield. However, he noted that this surge in Bitcoin’s value did not correspond with movements in the S&P 500 or Nasdaq, suggesting unique factors influencing the crypto market.

Addressing JPMorgan CEO Jamie Dimon’s suggestion to the Senate Banking Committee that cryptocurrency should be banned, Novogratz expressed surprise at Dimon’s stance. He pointed out that many of JPMorgan’s clients, including prominent investors, believe in Bitcoin as a store of value. Novogratz criticized Dimon’s view as being out of touch with the broader belief in Bitcoin’s value.

Novogratz discussed the progress in the development of spot Bitcoin ETFs. He mentioned the detailed updates in the S-1 filings by BlackRock and Bitwise, indicating a high level of scrutiny by the SEC. He highlighted the changes in BlackRock’s filing, particularly regarding custody arrangements and the creation of an Intraday Indicative Value (IIV).

Intraday Indicative Value (IIV) is a real-time estimate of the value of an Exchange-Traded Fund’s (ETF) assets. Calculated throughout the trading day, IIV provides a snapshot of an ETF’s net asset value (NAV) at any given moment. This calculation is typically done by assessing the current market prices of the ETF’s underlying assets, subtracting any liabilities, and then dividing by the number of outstanding shares. IIV is especially crucial for ETFs tracking volatile markets, like cryptocurrencies, as it offers investors a continuously updated valuation, helping them make informed decisions. It’s a key tool for transparency, indicating whether the ETF is trading at a premium or discount to its estimated fair value.

Novogratz expressed confidence that the SEC would soon approve a spot Bitcoin ETF, citing shifts in the regulatory landscape and the types of questions being asked in the application process.

Novogratz observed a growing interest in cryptocurrencies from institutional investors, as indicated by the rising CME futures basis for Bitcoin and Ether. He suggested that institutions without direct access to BTC or ETH spot markets might have been paying a premium for crypto exposure. He also noted the increasing percentage of long-term Bitcoin holders, which suggests that recent price appreciation has not yet prompted these holders to take profit.

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