Lucas Jackson/Reuters
- Galaxy Digital CEO said that the US is heading for a credit crunch and economic downturn.
- "[T]he commodity market is telling you, the oil market is telling you we're heading into a recession."
- In his view, it's time to invest in gold and bitcoin.
The US economy is facing a credit crunch and looks likes it's headed for a recession amid the Silicon Valley Bank fallout, according to Mike Novogratz, chief executive of Galaxy Digital, and that means it's time to be long on gold and bitcoin.
"If there was ever a time to be in bitcoin and crypto, this is why it was created, in that governments print too much money whenever the pain gets too great, and we're seeing that," he told CNBC Wednesday.
Over the last week, regulators closed down Silicon Valley Bank and Signature Bank. Prior to that, Silvergate Bank said it would wind down operation and liquidate the business. On Tuesday, ratings agency Moody's slashed its outlook on the US banking system.
"In a short period of time information has changed dramatically," he said. "The commodity market is telling you, the oil market is telling you we're heading into a recession."
Bitcoin notched a nine-month high on Tuesday, and on Wednesday hovered around $24,337. The token has rallied about 46% year-to-date.
Gold, meanwhile, rallied 1.37% Wednesday to about $1,937.50, and Brent crude oil, the international oil benchmark, tumbled 5.6% to trade around $73 a barrel.
"How do banks rebuild capital? They lend less," Novogratz said. "And so you're going to see a credit crunch happening in the United States and that's starting to get priced into the market in a dramatic way."
Novogratz also noted that the Federal Reserve is going to cut interest rates sooner than anticipated, as the bank crisis has shifted public "psychology."
"Listen, there is contagion," Novogratz said, adding that people learned their lesson with SVB, and there could be a trend toward Americans relying on just four or five depository institutions.
Stocks will likely go down in the short-term but then bounce on Fed's shifting policy, he noted. Central bankers are likely to pause at the March meeting, since this week it became clear something broke in the economy.
"I think they'd like to do a dovish hike just for credibility's sake," he said. "That would be a huge policy error."