Crypto exec Michael Novogratz says the Schwab-TD Ameritrade deal may have derailed wider adoption of financial advisers trading bitcoin

REUTERS/Rick Wilking

Michael Novogratz, the founder of Galaxy Digital. He spoke at a conference in Miami on Wednesday.

• Galaxy Digital founder Michael Novogratz told attendees at a conference predicted that registered investment advisers (RIAs) using platforms like Fidelity, which allow advisers to trade bitcoin, will be the next wave of investors to embrace the digital currency.
• But "plumbing is needed" for bitcoin to become more institutional, he said.
• Pensions "have been slow to move," he said at the Miami conference on Wednesday. While big-name endowments have invested in crypto-linked ventures, he said only 5% of endowments hold any bitcoin.
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MIAMI BEACH - Michael Novogratz, the colorful former Goldman Sachs and Fortress Investment Group partner who founded the digital investment bank Galaxy Digital, believes bitcoin can eventually become the "digital gold" he believes it is.

It just needs Baby Boomers' money to do it.

Registered investment advisers will be the next wave of investors to embrace the digital currency, but they need a more robust infrastructure to handle it first, Novogratz said at a Context Summits conference in Miami. Bitcoin has lost more than a half of its peak value reached in 2017, trading on Wednesday around $9,300.

Financial services giant Fidelity already permits advisers on its platform to trade and hold bitcoin. Novogratz told the conference that rival TD Ameritrade appeared to be close to joining the Boston-based giant in that offering before the November announcement of the merger with Charles Schwab.

REUTERS/Shannon Stapleton

A TD Ameritrade representative said the firm does not comment on "industry rumors or speculation." A Charles Schwab spokesperson said: "That's a question for TD, not us."

In November, days after deal talks were initially reported in the press, the two firms, longtime rivals in the brokerage space, said Charles Schwab had agreed to acquire TD Ameritrade for $26 billion.

The deal was an aggressive play for sheer scale in an increasingly competitive wealth management and brokerage landscape challenged by fee compression and filled with digital entrants geared toward a younger client set.

TD Ameritrade was an early cryptocurrency adopter, at least by institutional investors' standards. In December 2017, around the height of bitcoin hysteria, it started offering clients access to bitcoin futures on the Cboe exchange.

Charles Schwab, meanwhile, has not allowed clients to trade the cryptocurrency. A company spokesperson told the website RIABiz in September that investors "should view these currencies as a purely speculative instrument."

Novogratz, for his part is naturally bullish on bitcoin and has been vocal about that in the media. He told CNBC in October 2017 that he began investing in bitcoin and the wider digital currency ecosystem while he was at the New York-based Fortress Investment Group. He left Fortress in 2015.

Today, he's surprised that institutions aren't more quickly warming to cryptocurrencies.

Pensions "have been slow to move," he said at the Miami conference on Wednesday. While big-name endowments have invested in crypto-linked ventures, he said only 5% of endowments hold any bitcoin.

"It's happening a lot slower than I thought," he said, adding that he's not very positive on the outlook for non-bitcoin cryptocurrencies. Novogratz told an audience that he'd short all of them.

"I'm less confident that the radical-ness of the crypto revolution is going to happen" with bitcoin, he said. Becoming a digital version of gold is not that "sexy," but it is "clearly working," pointing to its rise following recent US strikes on Iran and the coronavirus outbreak in multiple countries.

He added: "What a beautiful speculative asset."

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