Novogratz: Crypto Speculation Era Ends, Tokenization Begins

In a recent CNBC interview, Galaxy CEO Mike Novogratz delivered a stark assessment of the cryptocurrency market’s evolution. He stated that the ‘age of speculation’ which captivated traders for years is conclusively over. According to Novogratz, the market is now transitioning toward a new paradigm where the underlying blockchain technology, or ‘crypto rails,’ will be used to bring banking and financial services to a global audience. This shift represents a move from purely speculative digital assets to the tokenization of real-world assets like stocks and bonds.

Novogratz was clear that this new focus will come with a different return profile. Tokenized real-world assets are expected to offer ‘much lower returns’ compared to the dramatic gains that characterized the previous speculative cycle. This statement directly addresses investors who became accustomed to the high volatility and potential windfalls of assets like Bitcoin, Ethereum, XRP, and Solana. The core narrative is changing from one of price discovery and hype to one of infrastructure and practical utility.

Novogratz contextualized this shift by pointing to significant market trauma. He drew a parallel between the November 2022 drawdown following the FTX bankruptcy and the more recent October 2025 flash crash. The latter event, while not triggered by a single catastrophic failure like FTX, wiped out a staggering $19 billion worth of crypto derivatives. Novogratz emphasized that ‘crypto is all about narratives,’ and such events have a lasting psychological impact on the market.

‘Those stories take a while to build and you’re pulling people in… so when you wipe out a lot of those people, Humpty Dumpty doesn’t get put back together right away,’ he told CNBC. This observation highlights how sudden, severe losses can fracture investor confidence and dismantle the prevailing market story, necessitating the construction of a new, more sustainable one centered on tokenization and real-world use cases.

Galaxy is putting its capital behind this new thesis. The firm is launching a $100 million crypto hedge fund before the end of March, as reported by the Financial Times. The fund’s structure reflects the blended future Novogratz envisions. It will allocate up to 30% of its assets to crypto tokens, while the remaining 70% will be invested in traditional financial services stocks.

This 70% allocation is specifically targeted at companies that Galaxy believes will be significantly affected by the ongoing changes in digital asset technologies and regulations. The strategy explicitly bets on the convergence of traditional finance (TradFi) and crypto, positioning the fund to benefit from the adoption of blockchain infrastructure by established financial institutions, rather than solely from the appreciation of native crypto assets.

The current market backdrop underscores the volatility that accompanies this transitional phase. Bitcoin has fallen more than 47% from its October all-time high above $126,000, recently trading around $66,551 and dipping near $60,000 last week. It is down 10% over the past week alone. Ethereum has matched that weekly decline, while major altcoins like XRP and Solana have posted even sharper losses during the same period.

This price action illustrates the lingering turbulence as the market digests the end of the pure speculation narrative and grapples with the emerging story of tokenization. The steep declines from recent peaks serve as a stark reminder of the sector’s inherent risk, even as its foundational purpose begins to evolve toward more tangible financial applications.