jakiro
author:Thejaswini, source: Token Dispatch
Preface
May 18, 2022.Michael Novogratz stared at his arm.
Terra Luna’s tattoo stares at him.This crescent tattoo cost him millions of dollars and almost ruined his reputation.Luna’s price plummeted from $80 to zero in 72 hours, evaporating $60 billion, the cryptocurrency circle now calls the “death spiral.”
Most CEOs would hire crisis management companies, blame market manipulation, or simply remain silent until the news cycle passes.
Where is Novograz?He sat down and wrote a letter.
“My tattoo will always remind me that venture capital needs humility,” he wrote in his letter, explaining in detail what went wrong and what Galaxy Digital learned from one of the biggest disasters in supporting cryptocurrencies.The letter was made public that afternoon.
When the bet fails, a standard strategy is often adopted: issue a statement with caution, shift your attention to “market conditions” and wait for the headlines to fade.Novogratz did not do this.He wrote a letter.
Instead of shirking responsibility, he described in detail what happened to Terra,What he misjudged and what he learned himself.In the financial world, frank confession is not unheard of, but he turns it into an industry case study.Others may try to downplay the losses, but he puts his mistakes in the spotlight and invites everyone to record the lessons.
Novogratz was never a typical Wall Street man.The former Goldman Sachs partner and Princeton wrestler built his career by viewing both victory and failure as material for the next big move.
Terra Luna’s collapse is enough to end the careers of most cryptocurrency practitioners.For Novogratz, this is just another chapter in his story, which began with a wrestling mat, passed through the currency trading hall and now covers everything from Bitcoin advocacy to billions of AI data centers.
Personal growth
November 26, 1964.Alexander, Virginia.
Michael Novogratz was born in a family of seven children, the third child, and this family treats competition just like other families treat vegetables: necessary, beneficial, and unnegotiable.His father played football at West Point, so his expectations for excellence were basic and at least had to show compelling results.
At Fort Hunt High School, Novogratz found wrestling.It is not only a sport, but also a lab, which allows him to learn how to understand his opponents, manage risks under pressure, and understand that preparation is more important than talent.
He finished second in the state competition and was later recruited by Princeton University.Participating in Level 1 wrestling at the Ivy League School means losing weight, making tactical preparations, and it all depends on personal performance.Novogratz was captain of Princeton University wrestling team and received honors as the Ivy League All-Squad in 1986 and 1987.
April 1, 1989.Goldman Sachs.
Novogratz joins Goldman Sachs as a short-term bond salesman, and he is one of hundreds of young recruits who pour in every year, all hoping to become partners.Most people will fail within five years.A few people will get rich.A fewer people will understand the bigger rules of the game.
The reason why Novogratz is unique is his grasp of the timing and his willingness to accept tasks that others may avoid.In 1992, Goldman Sachs sent him to Asia, and over the next seven years he experienced currency volatility and interest rate shocks, finally witnessing the 1997 Asian financial crisis.This experience allowed him to witness one of the most turbulent chapters in the modern market and made him one of Goldman Sachs’ global macro experts.
This period of experience in the currency and interest rate markets led him to become one of Goldman Sachs’ global macro experts when he was elected as a partner in 1998.
Partner status brings equity, profit sharing and authority to participate in internal investment opportunities in the company.More importantly, this makes him one of the global macro experts as Goldman Sachs prepares to dominate the financial markets for the next decade.
But Novogratz’s climbing career has not ended.
FortressThe Empire and its Fall
2022.FortressInvestment group.
Novogratz left Goldman Sachs to join one of the most iconic alternative investment platforms of the 2000s.FortressExpanding from private equity and credit to the global macro, they need someone who knows how to make money from currency chaos, interest rate volatility and commodity supercycles.
thenCentral banks of various countries actively manage exchange rates, emerging markets are gradually opening up to international capital, and technology has also given birth to new ways to trade various commodities, from Brazilian real to copper futures.Macro investment is entering a golden age.
Novogratz is in charge of FortressMacro Fund, the fund’s asset management scale grew to US$2.3 billion.The fund has been successfully operated for more than a decade until the market environment changed after 2008.
February 2007.FortressListed.
The company became the first major alternative asset management company in the United States to go public, briefly creating several billionaires on paper.Novogratz and his partners appeared on the cover of the magazine and gave keynote speeches at major conferences.For 18 months, they were stars in the financial industry, riding on the peak of the credit bubble.
Then, 2008 hit like a meteorite impact.
The financial crisis fundamentally changed the environment of macro trading.Central banks began to coordinate policies more closely, monetary relations changed in unexpected ways, and the market inefficiency phenomenon exploited by many macro funds disappeared.
By 2013, FortressMacro funds are in trouble.The post-crisis era is challenging for many macro strategies.Coordinated central bank policies reduce market volatility required by macro traders.The methods that have worked in the past decade have suddenly failed completely.
2015 10moon.Announcement is released.
FortressA $2.3 billion in macro business will be liquidated.Novogratz will exit and capital will be returned to investors.The industry’s top macro business built in thirteen years ended with a press release and a series of final investor conference calls.
This closure could have ended a career.However, Novogratz sees it as an education.The success of macro funds is based on identifying policy-driven market misalignment and exploiting it before others notice it.Its failure reflects changes in market conditions, not poor management.
He needed this lesson earlier than he expected.
Digital Gold Rush
2013.New York, Fortressoffice.
FortressPete Brig, co-CEO of Investment Group and a colleague of Goldman Sachs, called Novogratz and asked a question that changed his life: “Brother, do you know Bitcoin?”
The answer is to know nothing.
Novogratz has never heard of digital currencies, blockchain technology or cryptocurrencies.Like most traditional finance professionals, he thinks it is either a scam or a programmer’s toy.
But after Brig talked to his friends in California, he was convinced that Bitcoin represented something more important.They worked with former Tiger Management executive Dan Morehead, who founded Pantera Capital, one of the first investment companies focusing on cryptocurrencies.
They first bought it at around $200 for Bitcoin.Initially, this was just another macro bet.If the digital currency is successful, early adopters will make a profit.If they fail, they can also bear the loss.
This is a non-sovereign store of value that emerged when central banks implemented unprecedented monetary expansion.It provides exposure to technological disruption while hedging currency devaluation.
By 2016, Novogratz became one of the most prominent advocates of cryptocurrencies, appearing on financial TV to explain digital assets to institutional audiences who may ignore other cryptocurrency enthusiasts.His Goldman Sachs background and macro-investment experience have given him credibility among traditional investors who have just begun to view cryptocurrencies as legal asset classes.
But advocacy is not enough.He wanted to create something.
January 9, 2018.Galaxy Digital Official Announcement.
Novogratz has announced plans to build a comprehensive digital asset platform, combining transactions, asset management, investment banking and proprietary investment.
The vision is to become Goldman Sachs in the cryptocurrency space, providing institutions with the same scope of services as traditional investment banks, but focusing on the digital asset market.
Galaxy DigitalIt can be listed publicly without the uncertain regulatory framework for cryptocurrency business.July 31, 2018,Galaxy completed its reverse acquisition and started trading on the Toronto Stock Exchange GEM with the GLXY code.
Galaxy DigitalThe business model is different from that of pure cryptocurrency companies.Rather than simply buying and holding digital assets, the company actively trades its vault positions, capitalizing on the proceeds of successful transactions to finance operations and expansion.This approach is more flexible than a purely held strategy, but means that financial results depend in part on market timing and trading performance.
This strategy performed extremely well during the cryptocurrency bull market.As Bitcoin and Ethereum appreciate,Galaxy’s vault operations generate hundreds of millions of dollars in revenue.The company’s venture capital in crypto infrastructure and applications creates more value as the ecosystem matures.
But 2022 brings new challenges.
May 2022.The Terra Luna ecosystem collapsed in a few days, evaporating $60 billion in value, destroying one of the most sought after projects in the cryptocurrency world.When Luna’s algorithmic stablecoin mechanism fails catastrophically,Face financial losses and reputational damage.
Galaxy DigitalAs early as 2020, 18.5 million LUNA tokens were invested at $0.22 per coin and sold them gradually as the price rose.Galaxy Digital by April 2022 when LUNA peaks at $119Hundreds of millions of dollars in profits have been made and their positions have been reduced to almost zero.When the algorithmic stablecoin mechanism ultimately fails,The direct financial risk is minimal: only about 2,000 LUNA tokens remain, worth less than ten dollars after the crash.
Instead of covering up the mistake, Novogratz published a detailed explanation of where the problem lies and what lessons this incident provided.His CEO letter discusses the importance of risk management, due diligence processes, and the distinction between sustainable business models and experimental protocols in the cryptocurrency space.
He admitted that given the experimental nature of the project, his public support for Luna, including tattooing on Luna, was too early.
The letter became one of the most widely cited analysis after the Luna crash, as it honestly assessed that even experienced investors could go wrong with emerging technologies.
Bets on AI infrastructure
2024.Galaxy Digital, New Yorkoffice.
Novogratz is already planning for the cryptocurrency market as it recovers from Terra Luna and FTX crashesnext development.The company announced a significant expansion into the field of artificial intelligence infrastructure, leveraging its experience in energy-intensive computing operations to enter the AI data center market.
Galaxy Digital learned how to operate large-scale computing infrastructure through its cryptocurrency mining business.The skills to optimize Bitcoin mining can be applied to AI computing, but may lead to higher profit margins and more predictable revenue streams.
In August 2024, Galaxy Digitalreceived a $1.4 billion project financing for its Helios data center campus in Texas.The facility will provide 800 megawatts of computing power to GPU cloud provider CoreWeave, a 15-year contract,More than $1 billion in revenue is expected to be generated each year.
The Helios project aims to develop up to 3.5 GW of electricity capacity during full construction, makingBecome a major player in the market for supply-constrained artificial intelligence infrastructure.The business model promises higher profit margins and more predictable revenue than the cryptocurrency trading business.
The company maintains its existing cryptocurrency business while expanding to adjacent technology areas that leverage its existing expertise.
Cryptocurrencies have always been a combination of finance and drama.Few people reflect this perfectly as Novogratz.
He is a storyteller and a storyteller for trading.Luna’s tattoos, candid letters, appearances on cable TV.These are not just frank or branding, but proves that the market is driven by both narrative and numbersAccording to the driver.
The enterprises he built, whether it is FortressThe macro fund is Galaxy DigitalA hybrid of trading, venture capital and now AI data centers is all about giving form to a greater force than any individual.Money volatility, decentralized finance, and computing needs of machine learning.
If he looks reckless at times, it’s because he takes risks in an area without certainty.And if he seems prescient at times, it is because these areas reward the few who act quickly, suffer losses and can still increase the next bet.
For Novograz, the question has never been whether cryptocurrencies or artificial intelligence will fail.Because they cannot keep rising.The question is who can build a platform that is tough enough to withstand these failures.This may be his most important contribution in all the chaos and drama surrounding him: providing scaffolding to stand higher for the next generation of adventurers.
