Mike Novogratz: Two thirds of crypto hedge funds will default

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The CEO of the cryptocurrency investment company Galaxy Digital believes that amid the high volatility of the cryptocurrency market, many large investment funds will close.

Former hedge fund manager Mike NovogratzNovogratz, speaking at the Piper Sandler Global Exchanges & The Brokerage Conference in New York stated that most hedge funds investing in cryptocurrencies will fail due to the current decline in the digital asset market:

“Volume will fall and hedge funds will have to restructure. I estimate that of the 1,900 large crypto hedge funds, two thirds will fail.”

The continued decline in cryptocurrency prices over the past six months can be explained by the market's reaction to the withdrawal of incentives by the US Federal Reserve (Fed), says Novogratz.

The businessman explained the collapse of the Terra blockchain, in which he and Galaxy Digital had previously invested, by macroeconomic factors, but not by the shortcomings of the project:  

“The project was not strong enough tocope with the headwind of falling prices for bitcoins and altcoins. This was a catastrophic loss for the market. The CEO was incredibly smart and charismatic, and there was tremendous momentum behind what he did.”

Crypto Hedge Fund Annual ReportPwC showed that Terra USD (UST) was the third most popular stablecoin among cryptocurrency hedge funds from April 2022 until the default. Among respondents surveyed by PwC, 49% traded the affiliated token LUNA, which Novogratz immortalized with his infamous tattoo.