At long last, Galaxy Digital, the so-called “crypto merchant bank” backed by former Goldman Sachs partner Mike Novogratz, has experienced some reprieve from a bear market trend.
A press release obtained by Blockonomi has revealed that the company, which was launched near the peak of the previous Bitcoin bull market, has netted a substantial gain on one of its major blockchain-related investments.
Galaxy Sees 123% Return On Crypto Investment
The release, published Tuesday, revealed that Galaxy has liquidated most of its shares in Block.one, the blockchain development startup and fund behind the EOS protocol, for $71.2 million.
The company registers a realized return of 123% on the investment. While the merchant bank will only hold a minimal amount of shares of Block.one, they still will work with the startup in a number of capacities, like through Galaxy’s EOS-centric venture fund, and as a proponent of the blockchain in general. Novogratz then explained this recent decision:
“The acceptance of Block.one’s tender offer reflected a decision to rebalance the portfolio to maintain an appropriate level of diversification after the position increased due to its substantial outperformance relative to the remainder of the portfolio.”
As alluded to earlier, this is one of Galaxy’s biggest successes to date, as 2018 wasn’t all too pretty for the firm. Per previous reports from Blockonomi, Galaxy lost $97 million In Q4 of 2018, up from the $76.7 million loss registered in Q3.
Per the filing, much of this loss can be attributed to its principal investing and trading businesses, presumably due to the fact that November and December saw Bitcoin and other cryptocurrencies fall to fresh lows, far below what most analysts suspected.
In summation, the firm, seemingly primarily funded by Novogratz’s wealth, 20% of which is purportedly in Bitcoin and Ethereum, lost $272.7 million in all of 2018. Ouch.
As the filing notes, much of these losses were incurred as a result of either the sale of cryptocurrency. Analysis completed by Three Arrows Capital’s Su Zhu seemingly confirms this, as he notes that the company sold WAX and Ethereum in late-2018, which had then fallen dramatically since Galaxy acquired them.
Looking at Galaxy Digital's yearend filing for 2018, some observations:
1) $BTC now 63%, $ETH 21%, $EOS 11%, $XMR 5%. Exited $WAX.
2) Looking like they bought ETHBTC in Q1, bought ETHUSD and BTCUSD in Q3, sold WAXEOS in Q4, sold ETHBTC Q4https://t.co/Fzc7Ld34xj pic.twitter.com/G0DInou0KX
— Su Zhu 🦁 (@zhusu) May 9, 2019
This isn’t the end for Novogratz & Co. though. The report revealed that as of the end of fiscal 2018, Galaxy owned $350 million of assets, 50% of which constituted equity/stake in prominent industry startups.
Novogratz also tried to reassure investors, stating that the financials have not shown the “notable increase in activity across” Galaxy’s businesses in the first portion of 2019, likely as a result of investors coming to the conclusion that the market is poised for a rally, and have thus started to shovel money back into crypto.
More importantly, Galaxy has (or is expected to) launched another fund (rumored to have hundreds of millions in funding), which will loan out capital to cryptocurrency firms, a business that has boomed during 2018’s bear market.
Not The Only Block.one Beneficiary
Sure, a 123% return in around a year’s time is nothing to sneeze at, but another Block.one investor was recently revealed to be doing much better. Much, much better. Reported by Bloomberg on Tuesday, Block.one will be paying its earliest investors up to 6,567% on their initial investment through a share buyback.
This means that for a $100,000 investment, $6.6 million can be obtained. This performance is so legendary that Tom Shaughnessy, the co-founder of market analysis firm Delphi Digital, told reporters that Block.one is “very much the odd one out in the crypto market.” It isn’t clear who the Cayman Islands-registered firm will be paying out those jaw-dropping gains to, but they’re probably popping champagne right now.
The report revealed that Block.one is currently valued at $2.3 billion, with a $500 million cryptocurrency portfolio and a $2.2 billion “liquid fiat asset” stash, and is purportedly in a good position to continue to perform well as the bull market seemingly returns.