Full Disclosure, I do hold a long position in Galaxy Digital Holdings (GLXY.V)
“You can mine for gold, or you can sell pickaxes.”
When there was a gold rush in California, USA, and also in the Yukon, Canada, some people struck rich. But most people did not.
Do you want to know who made a ton of money? The businesses who sold wheelbarrows, pickaxes, tents, jeans, sieves, etc. Everyone needed this equipment, those who struck rich and those who did not.
You can buy Bitcoin, Ethereum, XRP, etc or you can buy the infrastructure around it. This includes opening a crypto-exchange, software and/or hardware wallet, crypto-advisory business, develop Dapps, etc.
Don’t have the knowledge, skill, team, time or devotion/interest in the above? That’s ok, because others do and you can invest in their companies. One of those such companies is Galaxy Digital Holdings.
GLXY.V – Galaxy Digital Holdings
Galaxy Digital Holdings is a publicly traded company on the TSXV Exchange (Toronto Stock Exchange Venture) with four main branches of its business: asset management, principal investments, trading, and advisory services. Galaxy Digital is a diversified merchant bank dedicated to the digital assets and blockchain technology industry. Galaxy Digital’s multidisciplinary team has extensive experience spanning investing, portfolio management, capital markets, operations and blockchain technology.
“Our mission is to institutionalize the space, and promote the growth and advancement of the underlying ecosystem and technology behind digital assets and blockchain.”
– Michael Novogratz, Founder, CEO and Chairman
It all began when the Founder and CEO, Michael Novogratz, an ex-Wall Street Banker who worked for Goldman Sachs developed an interested in cryptocurrency back in 2013. By 2017, 10% of his networth with in cryptocurrency assets. Realizing the long-term potential of the cryptocurrency industry, he decided to dive right in and create Galaxy Digital in 2016, dedicated to being a full service merchant bank for the digital asset industry.
The company completed a reverse takeover IPO of a shell company named Bradmer Pharmaceuticals (irrelevant) in 2018, and used the IPO to raise $201 Million USD in private stock placement. It began trading on the TSX.V August 1st 2018. The stock price has taken a tumble/beating since then, but so has the entire cryptocurrency market. The company has a strong team, with a strong mandate and business ventures. Along with the falling cryptocurrency market, the company lost ~$134 million in their first quarter. Not a great start, but I think that you cannot fully allow that to reflect the company as a whole and how it is actually performing.
Despite the decline in the crypto market, Galaxy Digital has managed to make 6 acquisitions and 11 various investments all for under $86 Million. Additionally, Mike Novogratz has attracted at least 3 other Goldman Sachs executives to help him manage his company. These include Richard Kim, COO (chief operating officer) of Galaxy Digital; Luka Jankovic, head of research and portfolio manager of Galaxy Digital; Ian Taylor, to oversee Galaxy’s advisory services.
The four branches of the business include:
- Asset Management – Galaxy Digital manages crypto related assets on behalf of third parties, much like any other investment firm or hedge fund. They offer these services for institutional investors, family offices, corporations, and high net worth individuals. All services are provided for fees.
- Principal Investments: Galaxy Digital makes financial investments in select cryptocurrencies to hold long-term such as BTC, ETH, XRP, LTC as well as what they deem promising new projects at the ICO or pre-ICO stage. They also make investments in start-up crypto-related corportations (see the list below).
- Trading – Galaxy Digital has a trading team in place that investing in liquid digital assets, buying and selling, completing some arbitrage trading for profit.
- Advisory Services – Galaxy Digital offers a wide range of advisory services to help start-ups and established companies in crypto to begin and advance their projects. They conduct market research, white paper writing, legal requirements, business and technical requirements, and project management. Additionally, they assist with capital raising/funding, mergers and acquisitions, company reorganization, capital re-structuring, and more.
The Principal Investments are the long-term investments of the company that will likely yield some of the greatest return if held long enough. Whereas the Advisory Services, Asset Management and Trading provide the active monthly income that Galaxy Digital will need to pay its expenses and bring in positive cash flow for profits. Then the profits can be re-invested in either expanding their active services and/or making more Principal Investments.
Michael Novogratz said in an interview in the late fall 2018 that he expects their advisory services to support the company with respect to covering costs by early-to-mid-2019. Moreover, the company still retains a large balance sheet of ~$280 million in assets. These assets are both cryptocurrency and institutional investment in start-ups that the average investor cannot invest in due to being “too risky” unless you are a certified “sophisticated investor” (net worth >$1Million USD not including primary residence, and/or income exceeding $200k/year).
When you invest in Galaxy Digital Holdings you gain access not only to millions of dollars worth of cryptocurrency that you otherwise wouldn’t be able to buy, but also a team of traders who’s full-time job is to know what is going on in the cryptocurrency market.
Additionally, on a more meaningful investment, within Galaxy Digital’s Principal Investments branch, it has holdings in:
- Hut 8 Mining Corp. *
- Silvergate Capital Corporation
- Spring Labs
* Also a publicly traded company you can invest in as an individual investor on the TSXV (HUT.V).
Did you read that list above? Do you want to read it again? Do you recognize some of those crypto companies? Bakkt – being launched by the NYSE to start crypto trading hopefully in 2019, pending US Government/SEC/CBOE approval. Some Bitcoin mining companies including Hut 8 and BitFury. The Crypto Exchange Bitstamp, one of the Big Four digital asset exchanges that worked hard to earn the trust of the global crypto community.
Both Galaxy Digital and Goldman Sachs have invested in the U.S. cryptocurrency custody firm BitGo, anticipated to be worth over $1 Trillion USD (as per an article from Business Wire) as a custody service and wallet provider.
Did you see Ripple up there? Are you bullish not only on XRP but also on Ripple the company? If you think that Ripple the company will succeed first in its remittance service, then with its bank-to-bank and business-to-business international settlement, and then in tokenizing stocks and real estate with R3 and Spring Labs… then Galaxy Digital is a company to own to gain exposure to those possibilities, including direct exposure/investment in Spring Labs.
Furthermore, Galaxy Digital Holdings also helped develop the Bloomberg Galaxy Crypto Index. Which as of January 2019 its holdings are: 30% BTC, 30% XRP, 24% ETH, 5% BTH, 4% EOS, 3% LTC, 1% Monero, 1% ETC, 1% ZCASH. As one of the first companies to develop a Cryptocurrency Index fund it is a trailblazer in the industry.
Based on its advisory service, principal investments, and trading desk solutions for institutional investors and family offices I am long term bullish on Galaxy Digital Holdings. The stock price dropped significantly until early 2019, when it was priced below its book value. Michael Novogratz, the CEO, increased his personal stake in GLXY.V with his own money when it was below book value, and this seemed to have driven the stock price a little higher.
With the cryptocurrency market trading mostly horizontal, and being in one of the longest cryptocurrency bear markets, plus all of the positive news of developments in the space, I personally anticipate that the entire cryptocurrency market will slowly start a quiet, steady bull march in the not too distant future.
Galaxy Digital Holdings is a company that has a multi-pronged approach to building out the cryptocurrency ecosystem. Its main overarching business is bridging the gap between institutions and the cryptocurrency industry. It has diverse crypto asset exposure and private equity investments in up and coming massive and popular crypto startups. Moreover, it has been attracting top institutional talent from Goldman Sachs and continues to grow with each passing quarter.
GLXY.V trades on a Canadian stock exchange, I do not believe that it is traded on any American stock exchanges because it requires ~2 years of audited financial statements after its Canadian IPO, but it may be worth looking into if it peaks your interest.
Now I am NOT a financial advisor, and you should always do you own research and seek the advice of a qualified financial advisor before making financial/investment decisions. I have disclosed that I do own GLXY.V and I’ve held it for many months and plan to hold it long.
Let me know what you think about this company and it as an investment. Will you search for gold, or sell pickaxes?
Full Disclosure, I do hold a long position in Galaxy Digital Holdings (GLXY.V)