The era of massive, retail-driven crypto gains may be winding down as more risk-averse institutional investors enter the market, according to Galaxy CEO Mike Novogratz.
Speaking at CNBC’s Digital Finance Forum in New York on Tuesday, Novogratz said the shift reflects a maturing industry. Retail investors, he noted, are typically drawn to crypto for exponential returns — not modest annual gains.
“Retail people don’t get into crypto because they want to make 11% annualized,” he said. “They get in because they want to make 30 to one, eight to one, 10 to one.”
Novogratz pointed to the 2022 collapse of FTX — which triggered a prolonged bear market and sent Bitcoin tumbling 78% from $69,000 to $15,700 — as a pivotal moment that caused a “breakdown in trust” across the industry.
He also referenced the Oct. 10 market downturn, describing it as a major leverage flush that “wiped out a lot of retail and market makers” and intensified selling pressure, despite the absence of a clear catalyst.
“This time, there’s no smoking gun,” Novogratz said. “You look around like, what happened?”
“Crypto is all about narratives, it’s about stories,” he added. “Those stories take a while to build, and you’re pulling people in … so when you wipe out a lot of those people, Humpty Dumpty doesn’t get put back together right away.”
Tokenized Assets as the Next Growth Driver
Looking ahead, Novogratz said he expects the industry to transition from high-risk speculation to more practical use cases, particularly tokenized real-world assets (RWAs), which he believes can deliver steadier, lower returns.
Speculation will not disappear entirely, he said, but it will increasingly be replaced by efforts to use crypto infrastructure to expand access to banking and financial services globally. “It’s going to be real-world assets with much lower returns,” he said.
Chainlink co-founder Sergey Nazarov echoed that sentiment Tuesday, arguing that tokenized RWAs will eventually “surpass cryptocurrency in the total value in our industry,” fundamentally reshaping its focus.
Long-Term Bitcoin Holders Remain
David Marcus, co-founder and CEO of Lightspark and a former PayPal executive, told Bloomberg on Tuesday that there has also been a shift in the profile of Bitcoin holders, suggesting that long-term believers remain positioned despite recent volatility.
“It’s just a change of who’s holding Bitcoin, and you’re moving from people that had long-term belief and were holding Bitcoin directly to just access to Bitcoin being wired off to our financial system and markets.”
He added that the shift in Bitcoin holders, combined with the Oct. 10 leverage flush, has altered the market’s dynamics. However, he said investors who have long viewed Bitcoin as a hedge against broader market turmoil are likely to remain well positioned.
