"Novogratz’s cryptocurrency hedge fund never launched. In December, after the price of a single bitcoin rocketed to more than nineteen thousand dollars, Novogratz told me that “it would be a different proposition raising a crypto hedge fund today than it was three months ago.” He said he was not comfortable running other people’s money when the currency was at its peak, and predicted that bitcoin would consolidate at between eight and sixteen thousand dollars. “I’d rather look stupid than be stupid,” he added. Right after he told me of his plans to shelve his hedge fund, bitcoin experienced one of its habitual micro-crashes, falling to under fourteen thousand dollars a coin.

Some people thought that Novogratz had simply not raised enough capital to launch the fund. Others focussed on the fact that, despite his penchant for showmanship, he was not making a good case for his fund. “To build a fund, you need a lot of focus and attention to detail and have ambition to be institutional,” the manager who’d proclaimed Novogratz a mere salesman told me. “A great trade is not a fund.”

Before he bailed, Novogratz had described another idea to me, one several magnitudes more audacious—certainly more institutional, and potentially more durable—than a mere half-a-billion-dollar hedge fund. He wanted to launch a publicly traded merchant bank solely for cryptocurrencies, which, with characteristic immodesty, he described as “the Goldman Sachs of crypto,” and was calling Galaxy Digital. “I’m either going to look like a genius or an idiot,” he said.

Novogratz announced the bank’s launch in early January, the same week that Dimon, of JPMorgan Chase, who is one of the most vocal critics of cryptocurrency, publicly regretted calling bitcoin a fraud (“The blockchain is real,” he told Fox Business). Shortly afterward, I sat down with Novogratz in his Tribeca apartment’s far-flung kitchen to discuss Galaxy Digital.

“Goldman Sachs can make money if the stock market goes up and if the stock market goes down,” Novogratz said. “That’s what we’re trying to build. Right now, we’re still going to be way correlated to the way the market goes for at least the first year or two,” he conceded. “But we’re trying to build enough diversity into the business that we can withstand hurricanes.” He told me that Galaxy Digital would combine his considerable crypto holdings with an asset-management operation, a trading business, a venture that would invest in new initial coin offerings, and an advisory arm that would counsel companies.

The new entity’s launch was not so much an I.P.O. as a complex R.T.O., or reverse takeover, involving a Canadian shell company called Bradmer Pharmaceuticals. Galaxy Digital would still be based in New York, but because Canada offered easier and faster access to the public market Novogratz had decided to launch on the Canadian TSX venture exchange, with plans to eventually transfer to Canada’s main exchange. He would contribute around three hundred and fifty million dollars, while raising another two hundred and fifty million dollars.

“It’s a brilliant move,” Josh Brown, the C.E.O. of Ritholtz Wealth Management, in New York, said. “It’s always better to own the casino than to play.” The hedge-fund manager Jeff Gramm told me, “If you really believe in crypto, this is an opportunity to dominate a growing niche that Goldman Sachs and the other big banks might be too risk-averse to bother with. Even if ninety per cent of these cryptos are total bullshit, you could build a really nice business. Think about Michael Milken and Drexel Burnham in the late seventies and early eighties. None of the big investment banks wanted to touch high-yield trading, and Drexel ultimately became the most profitable bank on Wall Street.” (Milken, known at the time as the “junk-bond king,” was also sentenced to ten years in prison for securities fraud. He was released after two years. Novogratz has publicly appealed to cryptocurrency tycoons to play by the rules and avoid Milken-like fates.)

Jed McCaleb, of ripple and stellar, predicted that in the next couple of years a lot of crypto companies with big balance sheets will acquire one another. “A merchant bank can facilitate that,” he told me. “It’s a timely thing to do.”

Of course, not everyone is on board with the idea of a finance billionaire Goldmanizing the new space. A self-described “crypto lawyer” wrote on Twitter, “Hey I know—let’s use crypto to recreate precisely the fucked up institutional structures that crypto was created to surpass.”

Recently, Novogratz showed up at a staid dinner for retired Goldman Sachs partners wearing his speed-racer pants. He had attended these dinners before, but not from his current position of success in crypto. The prodigal son had returned. The investment bank—encapsulating the highs and lows of his career—finds its way into many of his conversations. “We hired Goldman’s best guy in blockchain,” Novogratz told me on several occasions.

Government regulation remains the greatest challenge to the future of cryptocurrency. “It’s stressful, because the regulatory environment’s not clear,” Novogratz said. “You don’t even know what the rules are. In every country. Even in the U.S.”

On the day we met at his apartment, a regulatory crackdown in China, preceded by one announced in South Korea, was pushing the price of bitcoin down. (It hasn’t returned to its December high, and is currently priced at around seven thousand dollars.) Meanwhile, it appeared that hedge funds, many of which had ended 2016 either ailing or dead, were reporting their best returns in years. After six years of exploring finance, I concluded that, despite the expertise and the intelligence on display, nobody really knows anything. “In two years, this will be a big business,” Novogratz said, of Galaxy Digital. “Or it won’t be.”

His attitude seems to come from a battle-hardened place. “You know, when you’ve screwed up as much as me in life, you’re not so worried about it,” he said, over a glass of fine Burgundy, his voice echoing across his palatial kitchen. “I’ve tried my best. I think I’m right on this thing.”

https://www.newyorker.com/magazine/2018/04/16/a-sidelined-wall-street-legend-bets-on-bitcoin

(http://www.autoadmit.com/thread.php?thread_id=3950630&forum_id=7#35850951)