Mike Novogratz, chief executive of digital asset investment firm Galaxy Digital, told investors he was shocked by the level of regulatory focus on cryptocurrencies rather than artificial intelligence (AI), which he believes will spark a "deep fake" identity crisis.
The CEO explained during the company’s fourth-quarter conference call on March 28 that it’s “completely upside down” that the U.S. government has chosen to focus so much on cryptocurrency regulation while turning a blind eye to AI: “When I think about AI, it strikes me that we talk so much about the regulation of cryptocurrencies and not at all about the regulation of AI. I mean, I think the government has completely turned it upside down.”
The concern appears to stem from Novogratz's concern that AI could trigger an identity crisis of "deep fakes." “In many ways, one of the best use cases for encryption is around AI for authentication, because pretty soon you’re going to have a fake Mike Novogratz, hopefully a hair world?” he said.
However, he believes that blockchain-based applications will play a "huge role" in solving some of the problems posed by artificial intelligence: “Cryptocurrencies and blockchain are going to play a huge role in this. It’s foolish to think we should be caching the industry because Sam Bankman-Fried was in his Bermuda shorts.” That said, the CFTC held talks last week with a technology advisory committee about artificial intelligence and its implications.
As for the current state of the market, Novogratz said that "seller fatigue" and the reopening of China have helped the crypto industry recover significantly so far in 2023. "All the sales that needed to be done, right? There's so much bad news, if you have to sell, panic selling, and 'Holy shit! The thing could go to zero. "People are so panicked, you're exhausted," he said.
Following the Chinese government’s tough zero-COVID approach, Novogratz said he has noticed more cryptocurrency activity coming out of China. "China deregulates tech companies, including cryptocurrencies, [so] you'll see more activity from Asia." On a more technical note, Novogratz believes the cryptocurrency market will continue its upward trend through the rest of 2023:
"The market feels strong, and when I look technically on the charts, we've had a big weekly close. I'm surprised to hear myself say that given the state of mind I was in at the end of December, but if we're in three months, six months It’s no surprise that it’s going up a lot after a month, nine months.” The strong rally in the cryptocurrency market is also well reflected on Galaxy's balance sheet, which revealed today in its quarterly results that it is finally turning a profit after a whopping $1 billion loss in 2022.
