Indeed, Mike Novogratz, the CEO of crypto investment firm Galaxy Digital and former hedge fund manager, believes that the majority of hedge funds that invest in digital currencies will fail due to the current market decline, according to a report.
Speaking at the Piper Sandler Global Exchanges & Brokerage Conference in New York, the billionaire 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.”
According to Novogratz, the continuous drop in prices of cryptocurrencies over the past six months can be attributed to the market’s reaction to the U.S. Federal Reserve’s stimulus withdrawal.
In early May, Novogratz noting that crypto was very correlated to the Nasdaq stock market index, but that over time that correlation will eventually break down. However, he expressed his belief that there was still “more pain to come” for cryptocurrencies.
Novogratz reacts to the Terra collapse
Meanwhile, Novogratz has been exposed to criticism over his and his company’s role in the recent collapse of the Terra (LUNA) ecosystem, whose stablecoin TerraUSD (UST) lost its stability on May 9 and continued to decline ever since, causing LUNA to drop as well due to the association.
After the collapse, Novogratz himself has called the ecosystem a “big idea that failed” and said that the meltdown of the UST coin has dented confidence in crypto and decentralized finance (DeFi) space. He does, however, remain confident in the future of crypto.