Lucas Jackson/Reuters
- As chaos rips through the banking sector, Mike Novogratz said the case for crypto is more prominent now.
- Banks have been sitting on an "orgy of debt," the Galaxy CEO said, leaving customers exposed.
- Novogratz added that the government can "debase fiat currency," but cannot do the same to bitcoin.
Galaxy Digital CEO Mike Novogratz said the bull case for cryptocurrencies is even more prominent now as turmoil in the banking sector continues to unfold.
The slew of bank failures within the past month has highlighted weaknesses in the traditional monetary system and bitcoin's ability to eliminate many of its financial woes, he said at the FII Priority summit.
"In a lot of ways, this is crypto's moment," Novogratz said.
He alluded to bitcoin's often-cited use case as an inflation hedge because the crypto's finite supply of 21 million will help it retain value.
And unlike the Federal Reserve in the US, the digital currency is a peer-to-peer transaction system on a public ledger that lacks a centralized authority, making it less subject to decisions from a single source.
"We've just had a banking crisis in the United States, right? Satoshi started the Bitcoin white paper because he saw populism coming," Novogratz said, referencing the writing of the crypto's pseudonymous founder in 2008. "He didn't trust [that the] governments could control themselves so they would spend and spend and would debase fiat currency."
In theory, the government cannot devalue the currency because there's no single authoritative body. Users can also hold their crypto in a digital wallet and avoid the risk of a bank run.
"We just had an episode where we looked around and we're like: 'Oh my goodness. Our regional banks [and] our money-centered banks all have been on this orgy of debt.' [They've had extremely] low interest rates for too long," he said. "There's trillions of dollars of bad debt out there."
Silicon Valley Bank's failure earlier this month highlighted the massive unrealized losses sitting in the balance sheets of other banks, which bought up government-backed debt then saw their value drop as the Fed hiked interest rates.
On the other hand, government intervention and regulation can help investors recoup losses. If there's a fraudulent project or an insolvent crypto exchange like Sam Bankman-Fried's FTX, the Federal Deposit Insurance Corporation won't be able to step in and backstop customers.