"I can hear the herd coming," he said during an appearance on CNBC's "Fast Money." He likened Bitcoin to digital gold.
Novogratz says he has been investing in Bitcoin and its underlying blockchain technology for a while.
But whether Bitcoin lasts or eventually gets replaced by the next new thing, the underlying blockchain technology is probably here to stay, he said. "Blockchain will change the way we live," he said. "This is not going away."
Novogratz is starting a $500 million fund to invest in cryptocurrencies, initial coin offerings and related companies. He put $150 million of his own money into Galaxy Digital Assets Fund and plans to raise the rest from outside sources by January, mainly from wealthy individuals and families and fellow hedge fund managers.
Bitcoin was up 2.1 percent on Tuesday, to $4874.15 as of 5 p.m. ET, according to CoinDesk, and has surged in value this year.