Galaxy Digital is a crypto financial services firm that plays a key role in connecting the traditional financial sector with the burgeoning digital asset market.
The company is known as a pioneer in institutional digital asset development, investing in projects and assets at an early stage and often taking significant risks in the process. However, as the crypto asset markets have matured, Galaxy Digital has also been able to reap the benefits of bull markets, further supporting its position as a leader in the institutional digital asset space.
History of Galaxy Digital
Galaxy Digital was founded in 2018 by Mike Novogratz, an investment banker formerly a partner at Goldman Sachs and president of the Fortress Investment private equity firm. Novogratz became interested in Bitcoin in 2013 and became a vocal proponent for the industry and a key figure in the field of institutional crypto investment.
Over the following years, Galaxy Digital invested in many different digital asset ventures and set up crypto financial services across various segments. As such, the company underwent significant growth and investment during bull markets, which was tempered by losses during the bearish periods. For instance, the firm has invested in successful projects including Layer 2 network Polygon, institutional custodian Fireblocks, and infrastructure firm Bison Trails.
However, it was also a significant investor in Terra’s LUNA. Although the firm has never disclosed its gains or losses from its exposure to the project and its collapse, public filings show it lost over $650 million in the first six months of 2022, following the depegging of Terra’s UST stablecoin in May of the same year.
Even despite this incident, Galaxy Digital recovered, and Mike Novogratz retained his characteristically bullish outlook on the future of the crypto industry. In 2024, following the approval of several Bitcoin ETFs and the launch of a prime brokerage arm, analysts predicted a healthy outlook for the firm which looks to be further bolstered by the potential of regulatory developments in the US.
Galaxy Digital is headquartered in New York City, but the firm’s shares trade on the Toronto Stock Exchange under the ticker GLXY.
Galaxy Digital’s Business Model
Galaxy Digital operates several different types of services and investments, which it organizes into three business divisions: global markets, asset management, and digital infrastructure.
Global Markets
The main business of Galaxy Global Markets is an over-the-counter (OTC) trading desk for clients seeking to execute large trades off-exchange. For this, it connects to a wide range of liquidity venues and market makers.
Additional services within the Global Markets division include derivatives trading like options, swaps, and future and forward contracts. The company also operates as a crypto lender, including customized capital debt financing for bitcoin miners, allowing firms to use ASIC equipment as collateral.
It also offers so-called “specialty lending” which covers some novel and experimental use cases. For example, in June 2024, Galaxy Digital provided a multi-million dollar loan to Yat Siu, founder of Web3 gaming firm Animoca Brands. He collateralized the loan using a tokenized version of an antique Stradivarius violin bought for $9 million, which once belonged to Catherine the Great.
Digital Asset Management
As of April 2024, Galaxy Digital manages over $8 billion of assets on behalf of clients, which are spread across several types of investment funds.
Passive funds offer exposure to BTC, ETH, or even baskets of cryptocurrencies. They invest directly in the underlying assets in a way that’s rebalanced automatically, which keeps fees low.
In contrast, the Galaxy Liquid Crypto Fund is actively managed by fund managers who seek out opportunities for alpha across the markets.
Galaxy Digital Asset Management also operates a set of venture funds under the Galaxy Ventures moniker. These funds are used for Web3 startup funding rounds for up-and-coming projects, offering investors access to high-risk investments with the opportunity of outsize rewards.
Digital Infrastructure Solutions
Galaxy Digital Infrastructure provides infrastructural services that support digital asset and broader blockchain ecosystem investing.
Among these are mining and staking services for Bitcoin, Ethereum, and other networks. Along with its own mining operation, Galaxy offers hosting for third-party bitcoin miners at its premises. In late 2022, the company announced it had bought the Helios mining facility in Texas from Argo Blockchain for $65 million as part of a credit agreement.
In early 2023, Galaxy acquired GK8, a provider of crypto custodial services, enabling it to further expand its portfolio of businesses.
Galaxy Digital Essentials
- Galaxy Digital is a digital asset financial firm offering a suite of services to institutional clients.
- The firm was started by investment banker Mike Novogratz in 2018 and has become known as a pioneer in the field of institutional crypto investments, taking risks with the aim of advancing adoption.
- Galaxy Digital is organized into three business divisions: Global Markets, Asset Management, and Digital Infrastructure Solutions.