Host 2 (2:51)

So what is, what is the catalyst that turns the tide right now? You mentioned a market structure bill. Maybe that will bring some optimism, but I don't know. Is there anything else that. That could turn around this trade?

Mike Novogratz (3:02)

Yeah. So part of this acceleration recently, downwards, is the thought that, that Kevin Warsh is going to be very hawkish. What I think Kevin did is he took out the tail risks for inflation. Right. He's a man of integrity. He has worked alongside Stan Druckenmiller for a long time, literally since he left the Fed. And so you don't think he's going to do whatever Trump wants him to do. That said, he's pretty dovish right now. And I think once he gets in and starts talking, you know, looking at the environment that we see today, he wants rates lower. And I think once that market kind of rewrites him as a dove, at least a dove, given the current environment, that also could help. You know, there's probably been an overreaction on how hawkish he's going to be. But I do think, listen, he took out the tail risk, which is a good thing for America and not necessarily a good thing for gold, silver or bitcoin.

Host 1 (4:03)

I appreciate you making the connection back to the macro environment. Overall, I'm curious, with this softness that we're seeing in crypto, in Bitcoin, how does that change what Galaxy is doing? Do you still plan to launch this $100 million hedge fund, crypto hedge fund, in the first quarter that will bet on rising and falling prices. Does it change your timeline? Yes, how you're thinking about it?

Mike Novogratz (4:24)

Yeah. The great thing about this hedge fund, it's really a fintech fund and it's the broader ecosystem. So I said on our call, this is a tale of two cities, are really three cities, because we have this. We have this data center business, which is booming, thank God. Like, you know, if I didn't have the data center business, I'd feel a lot worse. But our data center business is now, you know, worth more than our crypto business. But within crypto, there's still a bull market, and there's a bull market in infrastructure. Right. The traditional banks and finance companies are moving into this space quickly. And you are seeing. We're seeing Lots of opportunities to partner with them, around building wallets, around staking and around really thinking about how token world assets, you know, move into the world. And so I think I haven't seen more excitement since I started from the traditional players to get engaged in digital assets. And we've got the old version of crypto, the tokens that exist today that just don't seem to have the same, the same support, the same appreciation, the same energy in them right now. And so some of that energy is shifted and you see, you see things like, you know, perpetual swaps on equities booming all of a sudden. So using the crypto infrastructure for real world assets, the crypto leverage system for real world assets. And so that part of the business is really exciting. We're leaning into it both in hiring and more and you know, utilizing our engineering team to help others get in this game. The other part is moving things more on chain and that is happening quickly.

Host 1 (6:10)

Right.

Mike Novogratz (6:11)

So you're going to see credit on chain and, and you already see the boom of stablecoins. If you look at the volume of stablecoins in the first month of the year, it's, it's explosive. And so we are moving into a digital world and it's going to run on crypto, you know, blockchain rails. Yeah, that's just not correlating with the price of Bitcoin, the price of Etherium, the price of Solana Ripple, you name it.

Host 1 (6:36)

So Mike, with this excitement with the data center business, would you consider a spin off to separate your crypto and data center businesses? Would you be open perhaps to selling your datacenter unit to any of the hyperscalers should they come knocking on the door?

Mike Novogratz (6:50)

Listen, we are, we are in the build mode on the data center business. We just got 530megawatts of power approved down in Texas. That's probably the largest new power approval in the United States for a while. And so I couldn't be more excited about that. Where we're engaging now with, you know, potential tenants, you can guess who they are. And so I think we're going to run this data center business and we're going to grow this data center business ourselves. The capital structure at Galaxy, something we think about a lot. And I said before, if, you know, A plus B is a bigger number than, than A plus B, we should stay together. And if it looks like we're getting penalized, we'll fig a way to, you know, maximize shareholder value. And so right now, you know, in the short term, our stock Seems to trade, you know, very cheap relative to what I think the datacenter business is worth, let alone the value of our, our book in our, in our, our crypto business. And so, yeah, we're certainly looking at it.

Host 2 (7:53)

Hey, Mike. Very briefly, and then we're going to do some news and come back to you in just a few minutes. Are we, You've seen a lot of cycles. You have the tattoos to prove it. Are we in a crypto winter right now?

Mike Novogratz (8:06)

Yeah, listen, I mean, we were at 130,000 and we're now at 76,000. And so that is what, a 40, 45% drop, if I did my math right, or maybe it's 40% drop. That's way through bear market and that feels awfully chilly. My question is, when is spring coming? And I think we're closer to spring than we are to the start of winter.

Host 1 (8:31)

Big picture when it comes to any kind of regulation, when it comes to crypto is what's going on with the crypto market structure. Bill. And the big sticking point at this moment is whether crypto companies can give some reward points or yield on stablecoin balances. You've said that the crypto industry is going to lose the battle against the banking lobby on this. Why is that, Mike?

Mike Novogratz (8:51)

Listen, there are a lot of banks. They've done this a long time. They're good at lobbying. They have community banks, their cousins, their poor cousins, very poor cousins in every district of every congressman. And the community banks are being used very effectively to say, oh, my goodness, oh my goodness, we're going to have this terrible deposit flight and then we'll not be able to give credit. It's, you know, it's not a real story, but why not? It's, it's working. Because, listen, if, if people wanted to take their money out of community banks, they could have put it into Galaxy's 8% offering or, or so fares. You know, there are so many neobanks and yet deposit flight is slow, right? Deposits in general are sticky. And so over time, yes, there would be deposit flight, but there should be because in most of Those banks, including J.P. morgan, Wells Fargo, you name it, Chase, Citibank, you put your money in your savings account and they pay you nothing. And they make a whole lot of money leaving it at the Fed at 3 and a half or 4%. And so it is terrible for the consumer. It's ironic that Washington, both Democrats and Republicans, are saying, hey, let's, let's, let's side on the. Let's side with big banks and not, not the consumers, not our constituents, but that's exactly what's happening. And so Brian Armstrong and, and, you know, the stablecoin issuers who are saying, hey, we want to, we want to actually have an innovative, you know, security that, that allows us to pass on some of that interest to our customers through rewards, or actually in the perfect way would be through direct interest. But, you know, banks are strong in the lobby and, you know, I do think a deal gets done somewhere in between, but right now, both sides are kind of at a Mexican standoff. Why do I think a deal still gets done? Like, the Republican senators have put a lot of time in this and have a lot at stake, right? Trump is the, quote, crypto president. You, you've got the House and the Senate. You better be able to pass a crypto bill or you look pretty weak.

Host 2 (11:05)

Give us your, well, give us your, your view on when you think that market structure bill will pass.

Mike Novogratz (11:09)

And the Democrats have the same, you know, the Democrats don't want the, the Crypto PAC, which just came out and said, We've got $190 million of a bazooka ready, ready to shoot at people that stand in the way of crypto. And so the Dems just want to pass this thing and have crypto off the table. In politics, it never should have been political. It always should have been a bipartisan issue. Elizabeth Warren made it political. Gary Gensler made it political. And so listen, I think this is, you know, to two weeks, it's six weeks. And I think my hope is we have something done.

Host 1 (11:45)

Okay. I want to get your take on prediction markets as well. The CFTC chairman, Michael Selig, clearly talking about the need to come up with some kind of rules of the road for this part of the market is growing very, very quickly. And I'm wondering from where you sit, what, what is the single most important legislation or rule that needs to be put forth on prediction markets?

Mike Novogratz (12:07)

You know, it's a, it's a, it's a good question. I think the industry, not the prediction market industry, but the sports betting industry, the gambling industry, got caught off guard at the cftc, basically said, hey, this is a new form of, of security or a new form of a. Not security, a new form of a platform to, for people to use as a hedging to make bets on, and they allowed it to. Right. And so since then, there has been a furious lobbying effort by the casinos and the sports betting places to say, that's not fair. We have all this. We have all this compliance we need to do and these guys don't. And so I'm guessing the CFTC is trying to thread the needle to keep the existing world happy to a degree and not have to go back on this new industry which is innovative as can be, which is growing, which has captured the imagination of, of not just the retail users of it but they had somebody like Ice, right. Jeff Sprecher put $2 billion into, into polymarket.

Host 2 (13:16)

Yeah.

Mike Novogratz (13:18)

And so I mean this is another battle of incumbents trying to protect their turf against an innovative, you know, new, new upstart. Yes.

Host 2 (13:28)

Our colleague Emily Nicole reported back in November that Digital Galaxy Digital is experimenting in prediction markets. Discussions with Polymarket and call Shea. What's the latest there?

Mike Novogratz (13:40)

You know again we, we didn't invest in those guys way back. I wish I had, I had the opportunity to and you know I quite frankly wasn't convinced that without sports bet, you know that just you know you weren't allowed to do politics Back then sports betting seemed off the, the table and so I didn't see where the, where the tam was and you know these guys proved me wrong and the, the CFTC gave them the pass. And so if you look at prediction markets most of the volume happens around sports betting. And so you know there are not that many things you want to bet on every day. But sports happen, they have their defined outcomes. Right. Politics, which again was illegal for us to us investors to bet on politics. And you know you had the whole raid of, of of polymarket. You know this is a new, new regime. It's a new administration with a very different view. And so, so what could we do? We want to look at infrastructure, we want to be market makers, we want it to you know, be providers of liquidity. And we're just getting started.

Host 1 (14:53)

Other trading firms, Mike have also considered getting involved in prediction markets like jump trading or sports, sports betting. Aqi Capital Management has talked about sports betting. How do you see this competitive landscape developing over the next year?

Mike Novogratz (15:05)

Listen, I mean there's, if you think about sports betting you've got, Susquehanna has been a giant in it. These, these high frequency traders with huge technology budgets will all they'll trade anything that moves and they're good at it. And so I think there will be lots of liquidity provided from that same group of people that provide liquidity in same day options and that market making everything. And so if retail comes there will be plenty of institutions to pick up their pennies and nickels.

Host 2 (15:36)

Mike, got to leave it there. Always love it when you join us on Bloomberg Crypto. Thanks so much for taking the time, especially on earnings day. That's Galaxy Digital's Mike Novogratz joining us from New York.