Key Takeaways
- • Michael Novogratz delayed the December 15 launch of his planned $500 million cryptocurrency hedge fund, which would have been the largest digital currency fund to date, citing unfavorable market conditions as the primary reason for the postponement.
- • Bitcoin experienced extreme volatility in mid-December 2017, plunging 47% from its record high above $19,800 to $10,400 on Coinbase, triggering Novogratz's decision to pause investor capital deployment rather than accept third-party funds during the downturn.
- • Novogratz, head of Galaxy Investment Partners, had committed $150 million of his own capital to seed the fund and was targeting an additional $350 million primarily from family offices and high-net-worth investors by January 2018.
- • Despite delaying the fund launch, Novogratz reaffirmed his bullish stance on cryptocurrency, stating he remains committed to building out a "full merchant bank for crypto" and noting the fund had already generated substantial profits from recent crypto positions.
- • The cryptocurrency hedge fund industry saw rapid expansion in 2017, with over 120 cryptofunds launched during the year for a combined total of at least 175 such funds, according to financial research firm Autonomous Next.
Summary
Michael Novogratz, the veteran macro hedge fund manager and CEO of Galaxy Investment Partners, announced on December 18, 2017, that he was delaying the launch of what was positioned to be the cryptocurrency industry's largest dedicated hedge fund. Originally scheduled for December 15, the $500 million Galaxy Digital Assets Fund postponement reflected Novogratz's concern over extreme volatility in Bitcoin and broader digital asset markets.
In comments to CNBC, Novogratz explained the decision directly: "We were supposed to launch on Dec. 15, and we paused. I didn't like the market conditions as a starting point to take other investors' money." The timing coincided with a severe Bitcoin selloff—the cryptocurrency had crashed 47% in a single week, plummeting from a record high above $19,800 to lows of $10,400 on the Coinbase exchange. This level of volatility presented an unfavorable entry point for accepting third-party capital.
Novogratz's fund structure called for $150 million in seed capital from his own capital, complemented by $350 million in additional commitments primarily from family offices and wealthy investors, with a January 2018 target for full capitalization. Despite the delay, Novogratz emphasized his continued conviction in the sector, stating: "We are still feverishly building out a full merchant bank for crypto. I am still very bullish on the space." He additionally noted that Galaxy Investment Partners had already generated substantial profits from cryptocurrency positions, which informed the decision to re-evaluate market timing rather than proceed during the downturn.
The fund's postponement occurred within a broader context of explosive growth in cryptocurrency-focused investment vehicles. Financial research firm Autonomous Next reported that over 120 cryptofunds had launched throughout 2017 alone, bringing the total number of such funds to at least 175. Novogratz's delayed fund would have represented a significant institutional entry point into the nascent asset class, distinguishing itself through its $500 million target size—substantially larger than existing digital currency funds at that time.
In comments to CNBC, Novogratz explained the decision directly: "We were supposed to launch on Dec. 15, and we paused. I didn't like the market conditions as a starting point to take other investors' money." The timing coincided with a severe Bitcoin selloff—the cryptocurrency had crashed 47% in a single week, plummeting from a record high above $19,800 to lows of $10,400 on the Coinbase exchange. This level of volatility presented an unfavorable entry point for accepting third-party capital.
Novogratz's fund structure called for $150 million in seed capital from his own capital, complemented by $350 million in additional commitments primarily from family offices and wealthy investors, with a January 2018 target for full capitalization. Despite the delay, Novogratz emphasized his continued conviction in the sector, stating: "We are still feverishly building out a full merchant bank for crypto. I am still very bullish on the space." He additionally noted that Galaxy Investment Partners had already generated substantial profits from cryptocurrency positions, which informed the decision to re-evaluate market timing rather than proceed during the downturn.
The fund's postponement occurred within a broader context of explosive growth in cryptocurrency-focused investment vehicles. Financial research firm Autonomous Next reported that over 120 cryptofunds had launched throughout 2017 alone, bringing the total number of such funds to at least 175. Novogratz's delayed fund would have represented a significant institutional entry point into the nascent asset class, distinguishing itself through its $500 million target size—substantially larger than existing digital currency funds at that time.
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