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Michael Novogratz, founder and CEO of Galaxy Digital on Monday said crypto markets may be setting up for a sharp upside move as global liquidity conditions shift, warning that digital assets could become the “pain trade” for professional <a href="https://yellow.com/news/scaramucci-says-solana-will-become-an-industry-standard-within-five-years">investors who remain underexposed. </a> Speaking in a year-end <a href="https://www.youtube.com/watch?v=WViV-7qf_hc">conversation</a> with SkyBridge Capital founder Anthony Scaramucci, Novogratz pointed to a combination of falling inflation, a potentially more dovish Federal Reserve and mounting stress in global currency markets as key macro forces that could reshape asset allocation in 2026.
<h2 id="crypto-underperformance-creates-positioning-risk">Crypto Underperformance Creates Positioning Risk</h2>
Novogratz said crypto has significantly underperformed assets with similar macro narratives, such as gold and silver, despite persistent inflation concerns and expectations for easier monetary policy.
He noted that professional investors have largely moved into risk-off positioning in digital assets, while broader retail engagement has faded.
He cited subdued sentiment indicators, including low search interest and declining social media activity around Bitcoin (<a href="https://yellow.com/asset/btc">BTC</a>), as signs that crypto is currently underowned.
According to Novogratz, this lack of positioning increases the risk of a rapid upside move if momentum returns.
“The painful trade is crypto higher, not lower,” Novogratz said, adding that if prices begin to gain traction, institutional investors may be forced to chase exposure.
He said crypto has “all the ingredients” for a move higher but has yet to break key psychological levels that would confirm renewed momentum.
<h2 id="dollar-weakness-and-fed-policy-seen-as-key-catalysts">Dollar Weakness And Fed Policy Seen As Key Catalysts</h2>
Novogratz said he expects a new Fed leadership team to lean more dovish, potentially accelerating interest rate cuts and pushing the U.S. dollar lower.
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He described a weaker dollar as a favorable backdrop for risk assets, including cryptocurrencies.
He also highlighted currency trades such as being long the euro or Australian dollar against the U.S. dollar as part of his broader macro positioning, signaling expectations for continued dollar softness.
According to Novogratz, easing financial conditions would increase global liquidity, a factor he described as central to Bitcoin’s long-term price behavior.
“Bitcoin is a global liquidity story,” he said, emphasizing that shifts in monetary policy often precede major moves in crypto markets.
<h2 id="japan-s-bond-market-and-yen-volatility-raise-global-liquidity-questions">Japan’s Bond Market And Yen Volatility Raise Global Liquidity Questions</h2>
Beyond U.S. policy, Novogratz flagged Japan’s bond market as an underappreciated risk factor. He pointed to the sharp rise in Japanese long-term interest rates, from near zero to around 2% as a potential early warning sign of broader instability.
He said volatility in the yen carry trade could have ripple effects across global markets, including crypto, if Japan is forced to intervene aggressively or alter its monetary stance.
Novogratz said Japan’s challenges highlight the limits of monetary accommodation in an environment where inflation pressures are beginning to surface, adding that central bank responses to these pressures will be critical for global asset prices.
He further said the interaction between inflation trends, central bank policy and global liquidity will determine whether crypto remains range-bound or enters a new expansion phase.
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Galaxy Digital CEO Michael Novogratz Flags A Hidden Risk For Investors Still Underweight Crypto

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