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Why Ex-Wall Streeter Michael Novogratz Is Investing in a Cryptocurrency Startup

Key Speakers At The Economist Finance Disrupted ConferenceKey Speakers At The Economist Finance Disrupted Conference
Michael Novogratz, former president of Fortress Investment Group, speaks during The Economist's Finance Disrupted conference in New York, U.S., on Thursday, Oct. 13, 2016. He has invested 10% of his net worth in cryptocurrency including Bitcoin and Ethereum.Photograph by Michael Nagle—Bloomberg/Getty Images

Michael Novogratz, founder and chief executive officer of Galaxy Digital Capital Management, has gone all in on crypto. On Wall Street, the ex-hedge fund manager made three fortunes and lost at least two. His latest bet is cryptocurrency. In 2013, Novogratz put $7 million of his own money in Bitcoin when it was selling at around $100 a coin. It now sells for more than 60 times that amount.

Novogratz just announced a $15 million investment in AlphaPoint, a New York-based financial technology company that helps institutions launch trading platforms and tokenize assets with blockchain technology. He said, “we are in the early stages of a fundamental transformation in financial markets due to the digitization of assets.” [Explainer on tokenized assets here.]

I went to the “Bloomberg Invest” conference last week where Novogratz spoke about the impact of cryptocurrencies on institutional investment. He said:

“Right now, the coins are kind of going sideways. But underneath, the people moving into the industry, it’s a straight line up. Job applications — straight line up. Private investing — straight line up. Part of that is Sand Hill Road, the great venture community of America, really missed Chapter 1. Marc Andreessen and Fred Wilson didn’t, they were involved. But, broadly speaking, they didn’t participate. And every deal now is getting funded by venture capitalists. And maybe part of it is FOMO. They are all now investing in the space, so you have much more prices in the private rounds.”

Venture firms like Andreessen, Benchmark, Sequoia, and USV have been investing in the space for quite some time. This “us versus them” mentality between cryptocurrency investors and everyone else is fascinating to watch, especially as more and more traditional Wall Street investors rush into the space.