Written by: Thejaswini M A
Translated by: Block unicorn
May 18, 2022. Michael Novogratz stared at his arm.
The tattoo of Terra Luna gazed back at him. This new moon tattoo cost him millions of dollars and nearly ruined his reputation. The price of Luna plummeted from $80 to zero in just 72 hours, evaporating $60 billion, a phenomenon now referred to in the cryptocurrency world as the "death spiral."
Most CEOs would hire crisis management firms, blame market manipulation, or simply remain silent until the news cycle passed.
What did Novogratz do? He sat down and wrote a letter.
"My tattoo will always remind me that venture capital requires humility," he wrote in the letter, detailing where things went wrong and what Galaxy Digital learned from supporting one of the largest disasters in cryptocurrency history. The letter was made public that afternoon.
When bets fail, the standard strategy is usually to issue a carefully worded statement, shift the focus to "market conditions," and then wait for the headlines to fade. Novogratz did not do that. He wrote a letter.
He did not shirk responsibility; instead, he detailed what happened with Terra, what Galaxy Digital misjudged, and what he personally learned. In the financial world, candor is not unheard of, but he turned it into an industry case study. While others might have tried to downplay their losses, he put his mistakes in the spotlight, inviting everyone to learn from the lessons.
Novogratz was never a typical Wall Street figure. The former Goldman Sachs partner and Princeton wrestler built his career by viewing both victories and failures as material for the next big move.
The collapse of Terra Luna was enough to end the careers of most cryptocurrency practitioners. For Novogratz, it was just another chapter in his story, a story that began on the wrestling mat, passed through currency trading floors, and now encompasses everything from Bitcoin advocacy to billion-dollar AI data centers.
Personal Growth
November 26, 1964. Alexandria, Virginia.
Michael Novogratz was born into a family of seven children, the third in line, where competition was treated like vegetables: necessary, beneficial, and non-negotiable. His father had played football at West Point, so expectations for excellence were fundamental, at least to show convincing results.
At Fort Hunt High School, Novogratz discovered wrestling. It was not just a sport but a laboratory that taught him how to read opponents, manage risks under pressure, and understand that preparation is more important than talent.
He became a state runner-up and was subsequently recruited by Princeton University. Competing in Division I wrestling in the Ivy League meant cutting weight, tactical preparation, and everything depended on individual performance. Novogratz served as captain of the Princeton wrestling team and earned Ivy League first-team honors in 1986 and 1987.
April 1, 1989. Goldman Sachs.
Novogratz joined Goldman Sachs as a short-term bond salesman, one of the hundreds of young recruits hoping to become partners each year. Most would fail within five years. A few would get rich. Even fewer would understand the larger game rules.
What set Novogratz apart was his timing and willingness to take on tasks that others might avoid. In 1992, Goldman Sachs sent him to Asia, where he experienced currency fluctuations, interest rate shocks, and ultimately witnessed the Asian financial crisis of 1997. This experience allowed him to witness one of the most tumultuous chapters in modern markets and made him one of Goldman Sachs' global macro experts.
His work experience in currency and interest rate markets led to his election as a partner at Goldman Sachs in 1998, making him one of the firm's global macro experts.
Partnership brought equity, profit sharing, and access to internal investment opportunities. More importantly, it positioned him as one of the global macro experts at Goldman Sachs as the firm prepared to dominate the financial markets for the next decade.
But Novogratz's ascent was not over.
The Fortress Empire and Its Fall
- Fortress Investment Group.
Novogratz left Goldman Sachs to join one of the most iconic alternative investment platforms of the 2000s. Fortress was expanding from private equity and credit into global macro, and they needed someone who understood how to profit from currency chaos, interest rate fluctuations, and commodity supercycles.
At that time, central banks were actively managing exchange rates, emerging markets were gradually opening up to international capital, and technology was creating new ways to trade various commodities, from the Brazilian real to copper futures. Macro investing was entering a golden age.
Novogratz managed Fortress's macro fund, which grew to $2.3 billion in assets under management. The fund operated successfully for over a decade until the market environment changed after 2008.
February 2007. Fortress goes public.
The company became the first large alternative asset management firm in the U.S. to go public, briefly creating several billionaires on paper. Novogratz and his partners graced magazine covers and delivered keynote speeches at major conferences. For 18 months, they were the stars of the financial industry, riding the peak of the credit bubble.
Then, 2008 hit like a meteor.
The financial crisis fundamentally changed the macro trading environment. Central banks began to coordinate policies more closely, currency relationships changed in unexpected ways, and many of the market inefficiencies that macro funds relied on disappeared.
By 2013, macro funds were struggling. The post-crisis era was challenging for many macro strategies. Coordinated central bank policies reduced the market volatility that macro traders needed. Methods that had worked for the past decade suddenly became completely ineffective.
October 2015. Announcement released.
Fortress would wind down its $2.3 billion macro business. Novogratz would exit, and capital would be returned to investors. The top-tier macro business built over thirteen years ended with a press release and a series of final investor conference calls.
This closure could have ended his career. However, Novogratz viewed it as an education. The success of macro funds is built on identifying policy-driven market dislocations and exploiting them before others notice. Its failure reflected changes in market conditions rather than mismanagement.
He needed this lesson sooner than he expected.
The Digital Gold Rush
- New York, Fortress office.
Peter Briger, co-CEO of Fortress and a former Goldman Sachs colleague, called Novogratz with a life-changing question: "Bro, do you know about Bitcoin?"
The answer was nothing at all.
Novogratz had never heard of digital currency, blockchain technology, or cryptocurrency. Like most traditional finance professionals, he thought it was either a scam or a toy for programmers.
But after talking with friends in California, Briger was convinced that Bitcoin represented something more significant. They collaborated with former Tiger Management executive Dan Morehead, who founded Pantera Capital, one of the first investment firms focused on cryptocurrency.
They made their first purchase when Bitcoin was around $200. Initially, it was just another macro bet. If digital currency succeeded, early adopters would profit. If it failed, they could absorb the loss.
It was a non-sovereign store of value that emerged during an unprecedented monetary expansion by central banks. It provided exposure to technological disruption while hedging against currency devaluation.
By 2016, Novogratz had become one of the most prominent advocates for cryptocurrency, appearing on financial television to explain digital assets to institutional audiences that might overlook other cryptocurrency enthusiasts. His Goldman Sachs background and macro investment experience gave him credibility among traditional investors, who were just beginning to view cryptocurrency as a legitimate asset class.
But advocacy was not enough. He wanted to build something.
January 9, 2018. Galaxy Digital announced.
Novogratz unveiled plans to create a comprehensive digital asset platform that combined trading, asset management, investment banking, and proprietary investing.
The vision was to become the Goldman Sachs of cryptocurrency, providing institutions with the same range of services as traditional investment banks but focused on the digital asset market.
By merging with a Canadian company, Galaxy was able to go public in a regulatory framework for cryptocurrency business that was still unclear. On July 31, 2018, Galaxy completed a reverse takeover and began trading on the Toronto Stock Exchange under the ticker GLXY.
Galaxy's business model was different from pure cryptocurrency companies. The firm did not simply buy and hold digital assets but actively traded its treasury positions, using the profits from successful trades to fund operations and expansion. This approach was more flexible than a pure hold strategy but meant that financial results partially depended on market timing and trading performance.
During the cryptocurrency bull market, this strategy performed exceptionally well. As Bitcoin and Ethereum appreciated, Galaxy's treasury operations generated hundreds of millions in profits. The company's venture investments in crypto infrastructure and applications created more value as the ecosystem matured.
But 2022 brought new challenges.
May 2022. The Terra Luna ecosystem collapsed in days, evaporating $60 billion in value and destroying one of the most sought-after projects in the cryptocurrency world. When Luna's algorithmic stablecoin mechanism catastrophically failed, Galaxy Digital faced financial losses and reputational damage.
Galaxy Digital had invested in 18.5 million LUNA tokens at $0.22 each back in 2020 and gradually sold them as the price rose. By the time LUNA peaked at $119 in April 2022, Galaxy Digital had made hundreds of millions in profits and had nearly reduced its position to zero. When the algorithmic stablecoin mechanism ultimately failed, Galaxy Digital's direct financial risk was minimal: only about 2,000 LUNA tokens remained, worth less than ten dollars after the crash.
Novogratz did not hide from the mistake but published a detailed explanation outlining where the problems lay and what lessons the event provided. His CEO letter discussed risk management, due diligence processes, and the importance of distinguishing sustainable business models from experimental protocols in the cryptocurrency space.
He acknowledged that, given the project's experimental nature, his public support for Luna, including the tattoo, was premature.
This letter became one of the most widely cited analyses after the Luna collapse, as it honestly assessed how even experienced investors can err in emerging technologies.
Betting on AI Infrastructure
- New York, Galaxy office.
As the cryptocurrency market recovers from the collapses of Terra Luna and FTX, Novogratz is already planning the next steps for Galaxy. The company announced a significant expansion into the AI infrastructure sector, leveraging its experience in energy-intensive computing operations to enter the AI data center market.
Galaxy learned how to operate large-scale computing infrastructure through its cryptocurrency mining business. The skills optimized for Bitcoin mining can be applied to AI computing, potentially yielding higher profit margins and more predictable revenue streams.
In August 2024, Galaxy secured $1.4 billion in project financing for its Helios data center campus in Texas. The facility will provide 800 megawatts of computing power for GPU cloud provider CoreWeave, having signed a 15-year contract, with Galaxy expecting to generate over $1 billion in revenue annually.
The Helios project aims to develop up to 3.5 gigawatts of power capacity upon full construction, positioning Galaxy as a major player in the supply-constrained AI infrastructure market. This business model promises higher profit margins and more predictable revenue than cryptocurrency trading operations.
The company maintains its existing cryptocurrency business while expanding into adjacent technology sectors that leverage its current expertise.
Cryptocurrency has always been a blend of finance and drama. Few embody this as perfectly as Novogratz.
He is a storyteller trader and a trader storyteller. The Luna tattoo, the candid letters, the appearances on cable television. These are not just acts of candor or brand promotion; they demonstrate that the market is driven by both narrative and data.
The enterprises he has built, whether Fortress's macro fund or Galaxy's hybrid of trading, venture capital, and now AI data centers, attempt to give form to forces greater than any individual. The volatility of currency, decentralized finance, the computational demands of machine learning.
If he sometimes appears reckless, it is because he takes risks in uncertain realms. And if he sometimes seems prescient, it is because these realms reward the few who act swiftly, absorb losses, and still manage to double down on the next bet.
For Novogratz, the question has never been whether cryptocurrency or AI will face failure. Because they cannot keep rising indefinitely. The question is who can build a sufficiently resilient platform to withstand those failures. Amid all the chaos and drama surrounding him, this may become his most significant contribution: providing a scaffold for the next generation of adventurers to stand taller.
That's all for today.
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