Galaxy Digital chief executive Mike Novogratz is expecting a bear market for equities but says cryptos are well-positioned to take advantage of a loss of trust in the global financial system.

The legendary investor told Australian Blockchain Week that he sees a “really hard, hard, hard investing environment in stock,” with the US Federal Reserve hiking the federal funds rate to “at least three, maybe four per cent before they kill inflation.

“They have been buying securities, they haven’t even stopped buying. So now they’re going to stop buying them and they will start selling them — we take all that liquidity out of the space, you’re going to have some major adjustments.”

Stocks could decline by “probably 25 per cent more from here,” he warned.

“Bear markets are brutally hard to trade. Right? They trade down, and the squeeze up seven, eight, 10 per cent — and then they roll right back over it. So that makes it a really challenging equity investment environment.”

The only way to “kill inflation” is to put the economy in a recession, which is hard to do with a populist in charge, Novogratz said.

Bitcoin looks “better and better” if officials act too slowly to tame it, he said.

“I keep saying Bitcoin is a report card on the stewardship of fiscal policy in our country,” Novogratz said.

He pointed to what has happened to the Turkish lira, which has lost 75 per cent of its value against the US dollar since late 2017, and more recently the Russian ruble, which is down 25 per cent against the dollar in less than a month.

“People want to own crypto, partly as a hedge,” he said.

‘The dollar is over’

“They also realise the dollar is over — right? You can’t have China say I don’t trust the dollar anymore. That’s shocking. The US dollar is no longer a risk-free rate.

“It’s certainly not risk-free if you’re Russian. It’s probably not-risk free if you’re China.”

All this geopolitical mistrust plays into crypto, a system that doesn’t need a government to trust. “And so it makes you really optimistic crypto.”

Novogratz also that Ethereum had become the “currency of culture,” citing its role in NFTs.

In the future, “we are going to have a lot of communities, you’ll have a collection of tokens that represent your participation in communities that you care about, and you’ll own them in your wallet,” Novogratz predicted.