Former Fortress Principal Michael Novogratz left the firm's colossal macro hedge fund almost two years ago, but has been discussing investments in virtual currencies since 2013 when he told a UBS conference...

"Put a little money in Bitcoin...Come back in a few years and it’s going to be worth a lot."

He was of course correct, Bitcoin was trading around $200 at the time and as recently as two weeks ago was worth $3000.

But today, Bloomberg reports that at the CB Insights Future of Fintech conference in New York, Novogratz told attendees that he has cut holdings (in Bitcoin and Ethereum) after the cryptocurrencies' latest "spectacular run," warning that "Euthereum had likely hit its highs for the year," and "cryptocurrencies were likely the biggest bubble of his lifetime."

However, while this all sounds desperately downbeat, Novogratz is still very "positively constructive" on the space overall. He should be - he has 10% of his net worth invested in the sector.

As Bloomberg reports, Novogratz says cryptocurrencies could be worth north of $5 trillion in five years -- if the industry can come out of the shadows.

"The Nasdaq got to $5.4 trillion in 1999, why couldn’t it be as big?" the former hedge fund manager said in an interview, referring the Nasdaq Composite Index. "There's so much human capital and real money being poured into the space and we’re at the takeoff point." To get there, though, companies need to develop sound business principles to satisfy regulators and lend legitimacy to the budding industry, as Novogratz says cryptocurrencies face "monster regulatory risk."

Novogratz said he took some profits on his bitcoin and ether holdings as prices surged, but still has 10 percent of his net worth invested in the sector, including blockchain-based assets he bought in fundraising mechanisms known as initial coin offerings.

He’s looking to add more ether if it falls between $200 and $150...

and more bitcoin if it falls to $2,000...

Novogratz ended with some more serious advice...

"Pay your taxes, because nobody in that space pays taxes. It’s a bunch of libertarians," he said, adding he thought a core group of developers have good intentions. "There really is a revolutionary spirit amongst the guys that are building this system."

Concluding that Bitcoin could become a viable store of wealth, similar to gold, while ethereum could be the platform underpinning the Googles and Facebooks of the future, while money transfers to securities settlement will probably be done using blockchain technology.