Crypto Rebound in H2 2022 ‘Unquestionable,’ Says PolySign CEO McDonald

Key Insights:

• Galaxy Digital CEO and crypto billionaire Michael Novogratz warned recent crypto pain could worsen in the coming quarters.
• His remarks come with both bitcoin and ethereum trading over 50% below November’s record highs.
• But PolySign’s McDonald is bullish on the prospect of an H2 rebound amid positive long-term fundamentals.

Billionaire cryptocurrency investor and CEO of Galaxy Digital Michael Novogratz has warned that things could get worse for cryptocurrency markets, before they get better.

The total market capitalization of cryptocurrencies fell under $2.0 trillion for the first time since July 2021, this week, down more than 50% from its all-time highs above $3.0 trillion last November.

This has coincided with a pullback to the low $30,000s per token in bitcoin (BTC) (also its lowest since last July) and a drop back towards annual lows under $2,500 in ethereum (ETH). Both currently trade slightly below their respective record highs above $69,000 and near $4,900 printed last November.

Galaxy Digital’s Novogratz warns of difficult quarters ahead

Novogratz said that one of the key challenges facing crypto markets is that they are increasingly correlated with US technology stocks, which have been taking a beating as of late due to rising interest rates.

US government bond yields have risen sharply (the ten-year yield is up over 1.40% since the start of the year) in recent months amid a “hawkish” shift from the US Federal Reserve in response to the persistence of high inflation this year.

Whereat the end of 2021, only a few interest rate hikes were expected from the bank this year, expectations are now for rates to reach around 2.5% by the end of the year and go as high as 3.5% in 2023.

Higher interest rates mean a higher “opportunity cost” of holding assets that either don’t yield (like cryptocurrencies, commodities and the stocks of non-profitable companies) or have a poor yield (like the stocks of profitable, but very high price to earnings ratio companies).

On Galaxy Digital’s Q1 2022 earnings call on Monday, Novogratz explained that “crypto probably trades correlated to the Nasdaq until we hit a new equilibrium.”

He warned that investors should prepare for “a very choppy, volatile and difficult market for at least the next few quarters before people are getting some sense that we’re at an equilibrium.”

PolySign’s McDonald says H2 rebound “unquestionable”

When pressed on whether he thinks support at $30,000 in bitcoin will hold in an interview on CNBC, PolySign CEO Jack McDonald on Tuesday said “it feels to me like we are sniffing around for a bottom.” A lot of speculative investors are being flushed out, while institutional investors and HODLers are holding firm, he explained.

McDonald added that, while a combination of bearish macro factors like rising interest rates, worries about persistent high inflation and fears about global economic growth are weighing on cryptocurrencies in the short-term, in the longer-term, he still expects demand for inflation protection and positive growth trends within the crypto space as supporting digital asset prices.

According to McDonald, big global institutions increasingly believe in the underlying blockchain technology, meaning the higher quality tokens and assets remain likely to prevail in the long run.

Finally, when asked about whether he expects a rebound in H2 2022, McDonald said it was “unquestionable,” saying that real money coming into the crypto space views the recent downturn as an opportunity for the longer term. “I remain very, very bullish,” he concluded.