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Mike Novogratz Says Majority of Crypto Hedge Funds Will Fail

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The CEO of cryptocurrency investment firm Galaxy Digital and former hedge fund manager, Mike Novogratz, said that two-thirds of crypto hedge funds will fail due to the sharp drop in the prices of these assets this year.

Future of Crypto Hedge Fund

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Speaking at the Piper Sandler Global Exchanges & Brokerage Conference in New York, Novogratz said that hedge funds investing in cryptocurrencies will eventually have to restructure. The chief executive also noted that the current state of the cryptocurrency market is a consequence of the Fed’s stimulus withdrawal, as well as the fall of Terra, which has undermined investor confidence in the space.

“Volume will fall, hedge funds will have to restructure. There are literally 1,900 cryptocurrency hedge funds. My guess is that two-thirds will go out of business.”

Hedge funds using cryptocurrency

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Novogratz’s comments come at a time when traditional hedge funds are increasingly diving into digital assets. According to the 4th Annual Global Crypto Hedge Fund PricewaterhouseCoopers (PwC) Report By 2022, roughly a third of the traditional hedge fund respondents in the survey are already investing in bitcoin and other digital assets. So far, hedge funds have limited their exposure.

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In fact, 57% of hedge funds posted less than 1% of their total assets under management (AUM). About 67% of those surveyed who currently invest in the market intend to invest more capital in this asset class by the end of the year. Even those hedge funds that have not yet invested in crypto have confirmed that they are in the late stages of planning or intent to invest.

While regulatory and tax uncertainty continues to be a constant hurdle to adoption, the lack of infrastructure and the availability of service providers is another challenge that many hedge funds face due to being actively involved.


Mike Novogratz and Terra Collapse

Cryptobull has also been criticized for its role in the Terra ecosystem. Interestingly, he not only invested in LUNC (formerly LUNA), but even received tattoo. Galaxy Digital has been investing in the Terra ecosystem since September 2020, long before the token entered the top 10.

The collapse of Terra did not hit Galaxy hard because the company not only diversified its portfolio, often took profits rather than let it all run, used a risk management system, and understood that its investments would be affected by macroeconomic events. He went on to say that the event was a learning opportunity for many players in the sector.

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