Galaxy Digital: Musk is Not the Big Picture

“It’s easy to get buried in the volatility of the day; Elon Musk’s Twitter comments, bitcoin going down 4,000 points, and everyone starts running around like chickens with their head cut off,” said Mike Novogratz, Galaxy’s CEO and founder, on Monday’s earnings call.

article-image

Mike Novogratz, CEO, Galaxy Digital; Source: Seb Daly / RISE via Sportsfile

share

key takeaways

  • Galaxy reported a 58% increase in assets under management during the first quarter, the firm announced Monday
  • The company, which is listed on the Toronto Stock Exchange, also reported a net comprehensive income of $860 million, up from $336 million during Q1 of 2020

It’s been a volatile few days for the digital asset market, largely due to controversial remarks made by Tesla CEO Elon Musk, but executives at crypto-focused financial services firm Galaxy Digital Holdings urge investors to look at the big picture. 

“It’s easy to get buried in the volatility of the day; Elon Musk’s Twitter comments, bitcoin going down 4,000 points, and everyone starts running around like chickens with their head cut off,” said Mike Novogratz, Galaxy’s CEO and founder, on Monday’s earnings call. “I don’t want to miss the big picture. The big picture is that this space is growing.”  

Galaxy reported a 58% increase in assets under management during the first quarter, the firm announced Monday. The company, which is listed on the Toronto Stock Exchange, also reported a net comprehensive income of $860 million, up from $336 million during Q1 of 2020. Counterparty loan originations increased more than 510%. 

Executives acknowledged that the bullish crypto market during the first quarter certainly contributed to Galaxy’s growth, which may have investors fretting over how the firm will perform in a bearish market.

Getting going with BitGo

Earlier this month, Galaxy revealed plans to purchase cryptocurrency custody provider BitGo, which executives said will dramatically expand Galaxy’s reach and client base. The deal is subject to regulatory and shareholder approval and will likely not close until Q4. 

“The current crypto bull market has boosted Galaxy Digital’s AUM and trading earnings dramatically,” said Matt Weller, the global head of research for Forex.com. “But the firm’s recent $1.2B acquisition of custodian and service provider BitGo shows that Galaxy wants to bolster its appeal to ‘stickier’ institutional capital that is more likely to stick-out a bear market than finicky retail funds.” 

Acquiring BitGo will add 400-plus net new clients to Galaxy on day one, Damien Vanderwilt, co-President and head of global markets at Galaxy, said on the call. The acquisition will also will expand Galaxy’s staff and service capabilities, he said, signaling that the purchase provides and opportunity for Galaxy to get ahead in the industry. 

“The BitGo acquisition is really a preparation for the time when digital asset investing is commonplace, and a business can be built around it without having to rely solely on the price of bitcoin,” said Adam Blumberg, co-founder of Interaxis. “They are going to get custodial fees, and have the ability to lend to and against additional digital assets. They seem to be taking this time to diversify within the digital assets space.” 

ETF expansion

Galaxy also recently expanded into the exchange-traded product space, which is booming in Canada while American firms continue to wait for SEC approval. The CI Galaxy Bitcoin ETF (TSX: BTCX) debuted on the Toronto Stock Exchange in March. 

“The SEC’s continued delays in approving a bitcoin ETF are holding back the entire crypto industry and delaying widespread institutional allocations to the asset class,” said Weller. “If the SEC does approve a bitcoin ETF this year, the sponsor(s) would quickly attract billions in capital.” 

While Novogratz maintains that bitcoin’s significant pullback is no cause for concern, the situation does highlight an alarming characteristic of the digital asset market. 

“While not uncommon for the nascent asset class, the recent market volatility has reminded investors how quickly unrealized profits can evaporate,” said Weller. “If crypto markets continue to see more two-way trade, crypto brokerage stocks like Coinbase could be the big beneficiaries at the expense of asset managers like Galaxy Digital.” 

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg

Research

In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.

article-image

The stock price jump comes after Coinbase reported ending its seven-quarter run of net losses during the fourth quarter

article-image

BUZZ holds shares of Coinbase, Robinhood and MicroStrategy

article-image

Opinion: Even though I didn’t pay for my “Diamond Hands” burger with BTC, don’t let that fool you into thinking that crypto’s development is futile

article-image

The results mark “a major positive inflection point,” one analyst says, as the exchange carries net income momentum into a crypto rally

article-image

While the slate of 10 US spot bitcoin funds have tallied $4.6 billion of net inflows thus far, half of the field is lagging the leaders

article-image

Trading volumes totalled $154 billion in Q4, including $125 billion in institutional volume