Mike Novogratz's Vision for Rebuilding Finance with Crypto

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

So Tracy, that whole GameStop thing was pretty crazy, huh?

Tracy Alloway (0:21)

I noticed you were putting that in the past tense, so you think it's over already? We're still in the midst of our Odd Lots GameStop series, so please don't say it's over.

Joe Weisenthal (0:32)

It's not over. I mean, I do think the squeeze and just like this incredible moment where the squeeze got so intense that it was causing various hedge funds to not only put up massive losses on their short positions, but also have to liquidate some of their long positions to de-gross overall.

I mean, it feels like we're sort of in, we sort of faded a little bit, but obviously the sort of impact of this moment not going away anytime soon.

Tracy Alloway (1:01)

Right, so I agree that the technicals for GameStop look to be diminishing at this point. You've got the short positions have mostly all been closed. The gamma squeeze probably isn't going to be as easy to achieve now, because calls are going to be a lot more expensive.

And of course, most of Wall Street bets is currently arguing with each other about what to buy next. But I guess that kind of brings us to the topic for this particular episode.

Joe Weisenthal (1:29)

Right, and I mean, I think there's like a few things. So obviously, lots of concerns raised about market structure, how markets work, how markets settle, did the whole big guy, little guy thing, is the card, is the debt, you know, stacked against the individual trader? Not really convinced it is, but so many questions, I think sort of like, it was not a good moment for trust, I would say, for traditional markets.

I don't think like by and large, even if the system did kind of work, and some of these curves were put in place before it got completely out of hand, like I don't think traditional markets, market structure, I don't think too many people came out like looking particularly good out of it.

Tracy Alloway (2:13)

Yeah, I mean, I feel like market structure is always going to be a hard sell to the majority of people. And, you know, I say that as someone who used to write market structure stories and had to pitch them to editors whose eyes would occasionally gloss over.

But the industry definitely did not cover itself in glory over the past week or so. And you can see a lot of the outrage online, the talk about Robinhood basically protecting hedge funds by shutting down or limiting trading of a bunch of different stocks and some other types of assets. The distrust is there for sure.

Joe Weisenthal (2:48)

Right, so coming into this, of course, obviously 2020 or 2021, but also the second half of 2020 has been a huge sort of boom for crypto, Bitcoin surging to new highs. I should note recording this February 3rd, 2021

I think Bitcoin is around 36,000. It's old high was around 20,000 back in 2017 So we have this industry that's really regathered a lot of momentum. And there are many participants in the industry that say, look, this traditional finance, stocks, all kinds of issues with it, maybe some reasons not to trust it. You don't know the rules.

How about crypto? This is our moment, something more transparent, something where the rules are much harder to change on the fly. And so I think there's, you know, you already had this momentum for the industry coming into this moment. And I think probably a major attempt to seize on it by some of the big players.

Tracy Alloway (3:48)

Yeah, I feel like there are probably two overlaps with the GameStop situation here. One is, is Bitcoin an asset that's going to get a lot of retail attention? Or as we see a bunch of meme stocks get more popular, is that maybe gonna take away attention from something like crypto? And then secondly, this idea of decentralized finance, whether or not something like Bitcoin could be an alternative to the existing financial system that a lot of people don't really believe in.

Joe Weisenthal (4:18)

Yeah, exactly right. So our guest today I think is probably one of the best people to discuss all this because he really has seen both sides of this divide all the different worlds from multiple perspectives, crypto, traditional finance, traditional big banks, hedge funds. We're gonna be speaking with Mike Novogratz. He is the CEO of Galaxy Digital, which we'll get a full description of, but it's sort of this crypto investment bank with lots of different aspects in the crypto world. But prior to that, for several years, he was a global macro manager at Fortress. And prior to that, he did 12 years at Goldman Sachs. So he really knows the financial world inside and out, seen the traditional space, knows crypto extremely well. I mean, a lot of like ex finance names have gotten into crypto, but Mike actually beat them all to it and was there when everyone was mocking it.