The crypto industry still has a long way to go before it can operate independently of Bitcoin’s price movements, according to Michael Novogratz.
Despite years of growth and increasing complexity, he argues that most crypto-native companies remain locked into the same boom-and-bust cycle driven by the market’s largest asset.
Key Takeaways
Crypto company revenues still move almost directly with Bitcoin’s price, and that dependence is not fading anytime soon.
Even diversified crypto firms feel downturns through lower fees, weaker trading, and reduced staking income.
Galaxy Digital is leaning on data centers and infrastructure to smooth earnings and reduce volatility.
Despite recent weakness, the setup into 2026 could favor a sharp crypto rebound.
In Novogratz’s view, diversification inside crypto has limits. Even firms that span asset management, trading, staking, and advisory services ultimately generate income that expands and contracts alongside prices. The result is a business environment where revenue volatility mirrors market volatility almost one-for-one, something he believes will persist for several more years.
The illusion of diversification inside crypto
A key point Novogratz emphasized is that balance sheet exposure is not the real issue. A company could theoretically hold zero digital assets and still suffer when prices slide. Lower valuations compress management fees, reduced market activity hurts trading income, and staking rewards lose purchasing power almost instantly when tokens fall.
That dynamic, he says, makes crypto firms fundamentally different from traditional financial companies. Banks, insurers, and asset managers typically rely on a mix of lending, services, and long-term contracts. Crypto businesses, by contrast, still revolve around asset prices, which keeps earnings fragile during downturns.
Why Galaxy is leaning into infrastructure
To soften that volatility, Galaxy Digital has been expanding beyond pure crypto exposure. Its growing footprint in data centers and digital infrastructure is designed to tap into steadier demand tied to computing and long-term capacity needs rather than token prices.
Novogratz suggested that this side of the business is already comparable in value to Galaxy’s crypto operations. Because infrastructure follows a different economic rhythm, it offers a stabilizing effect that most crypto-native models currently lack. Over time, this divergence could even justify separating Galaxy into two standalone businesses, though that option remains under consideration.
Why he’s still optimistic on the cycle
Despite acknowledging crypto’s structural weaknesses, Novogratz is far from pessimistic. He expects macro conditions to gradually turn more supportive, especially if the Federal Reserve moves toward easier policy. A softer dollar and lower rates, he believes, could reignite interest in risk assets.
He also pointed out that crypto has trailed behind traditional stores of value such as gold and silver, which have already posted strong gains. That lag, in his view, leaves room for a sharp catch-up move once sentiment shifts.
The path forward
For now, Novogratz sees no escaping Bitcoin’s gravitational pull. Crypto companies remain exposed to the same price forces that drive the broader market. But as infrastructure businesses mature and revenue models evolve beyond percentage-based fees, that dependence should slowly weaken.
Until then, the industry’s fortunes remain closely tied to the next major move in Bitcoin, with true financial independence still several years away.
