Central banks and governments have gone into overdrive over the past few months to keep the world’s economy afloat. Case in point: the Federal Reserve’s balance sheet alone is up over $2 trillion in the past two months and is on track to double in holdings over the course of 2020.
Mike Novogratz, CEO of Galaxy Digital, recently argued that the ongoing increase in the growth in the money supply will act as boons for Bitcoin and gold, venturing as far as to say that these assets have the potential to go “much higher than we’ve had before.”
Bitcoin and Gold Are Novogratz’s Favorite Bets Due to Fiscal Spending
On Monday, Novogratz appeared on CNBC’s “Closing Bell” to discuss where he sees opportunities to invest in the ongoing macroeconomic turmoil.
Surprisingly, he stuck to his guns, asserting that he is bearish on stocks due to the uncertainty in the economy but “very bullish” on hard assets, which gold and (arguably) Bitcoin fit into.
— CNBC's Closing Bell (@CNBCClosingBell) May 4, 2020
As to why this is the case, the former Goldman Sachs partner asserted that with “central banks and fiscal agents” pushing their balance sheets to unprecedented levels, with “20-25% GDP budget deficits,” it is unclear how other assets will act except for hard assets, which should increase in value due to their “safe-haven” properties.
With this in mind, Novogratz posited that Bitcoin and gold have a “very decent chance” of rallying “much higher than we have had before” — this means prices of over $20,000 for BTC and over $1,900 for an ounce of the precious metal.
Novogratz’s comment seemingly comes in response to news that the Treasury department of the U.S. government said it is borrowing a record of $2.999 trillion for the ongoing quarter, Q2 of 2020. This comes after nearly $500 billion in borrowing in Q1 and another $700 billion expected in Q3, which will result in the “20-25% GDP budget deficit” he mentioned.
Now Add the Halving Into the Mix
Record fiscal spending isn’t the only thing that has Novogratz bullish though.
As many know, in seven days Bitcoin will see what is known as a “halving,” when the number of coins issued per block gets sliced in half, which is a de-facto 50% inflation rate cut. The investor explained that it’s perfect that the inflation of the fiat money supply is increasing as the inflation of Bitcoin is decreasing:
You talk about inflation in fiat currencies where the Federal Reserve is printing money like it has a money-printing machine, and in the Bitcoin space, the money supply gets cut 50%. Big deal there.
Novogratz didn’t share a price prediction in this latest CNBC interview, yet one of his close peers, Dan Morehead, has.
Per previous reports from Blockonomi, Morehead observed in the April edition of his company’s newsletter that Bitcoin could rally to $115,212 by the coming years due to the halving, finding that there is a potential relationship between the decrease in inflation and the size of the rally seen.