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Galaxy Digital Holdings Ltd. (TSX: GLXY) (“Galaxy Digital” the “Company” or “GDH Ltd.”) today released financial results for the three and six months ended June 30, 2021 for both itself and Galaxy Digital Holdings LP (the “Partnership” or “GDH LP”).

“While the second quarter included significant volatility and macro-related headwinds to near-term results, our core operating activities including providing liquidity and execution services for clients and counterparties, and our strategic investment portfolio, delivered another quarter of rapid growth consistent with the pace of adoption of the crypto economy,” said Michael Novogratz, Founder and CEO of Galaxy Digital.

“Even with the broad-based digital asset market declines within the quarter, Galaxy again demonstrated strong counterparty trading volume growth and continues to add more blue-chip partnerships across the firm, most recently with Bloomberg and Goldman Sachs,” Mr. Novogratz added.

Quarter-to-date Market and Company Updates, Third Quarter 2021:

  • Since the end of the second quarter, total cryptocurrency market capitalization has increased 33%2 and institutional adoption trends have remained positive, reinforcing our long-term thesis about the value and growth potential of this asset class.
  • Total value locked in decentralized finance (or “DeFi”) for the sector has increased over 30% quarter-to-date in the third quarter 20213.
  • The 2021 Fidelity Digital Assets Institutional Investor Study in July showed 71% of institutions expect to invest in digital assets in the future, and 91% of those expecting to invest believe it will be part of portfolios within the next five years.
  • The Company continues to invest to drive growth through ongoing product launches across the platform, including the Galaxy Vision Hill Venture Fund-of-Funds I, the Galaxy Interactive Strategy, and the live launch of Prime Services for select clients.
  • As of July 31, 2021, Galaxy Digital Asset Management reported preliminary AUM1 that surpassed $1.6 billion.
  • In June, the Company announced that it is serving as liquidity provider for Goldman Sachs’ Bitcoin futures block trades on the CME Group, as Goldman expands its cryptocurrency offering.
  • The Company has now deployed over $52 million of strategic capital into 14 different NFT-related companies with direct investments and through Galaxy Interactive Fund strategies.
  • Key recent hires to fuel expansion include Tim Grant as Head of Europe and Jennifer Lee as Chief People Officer.

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1 

AUM is inclusive of sub-advised funds, committed capital closed-end vehicles, seed investments by affiliates, and fund of fund products associated with the Vision Hill acquisition. Changes in AUM are generally the result of performance, contributions, and withdrawals.

2 

Represents coinmarketcap.com total cryptocurrency market capitalization quoted price.

3 

Represents total value locked in DeFi according to defipulse.com.

Select Financial Highlights for the Second Quarter 2021, compared to Second Quarter 2020

  • Net comprehensive income4 decreased to a loss of $175.8 million, from a net comprehensive gain of $35.3 million in the prior year period.
    • During the quarter, our results were impacted by a 34%5 decline in overall digital asset prices and a 41% decline in the price of Bitcoin, relative to the end of the first quarter.
    • While our core digital asset holdings experienced a market-driven net loss during the quarter, these impacts were offset in part by a combination of elevated counterparty trading activity, gains in derivatives from hedging and other activities, as well as continued strong growth across our operating businesses, led by our market-neutral trading and liquidity provisioning.
    • Furthermore, gains from our Principal Investments segment increased to $214.1 million in the quarter, and contributed significantly toward offsetting the impact from broader digital asset price declines.
  • Partners’ Capital increased 320% to $1.5 billion, from $356.6 million at the end of the prior year period.
    • During the quarter, Partners’ Capital declined to $1.5 billion, from $1.7 billion, due to losses on our core long digital asset positions. The 11% decline in Partners’ Capital compared favorably to short-term broader digital asset market declines and was offset in part by gains in our investment portfolio, which grew to $613 million from $351.6 million in the prior quarter.
    • As of June 30, 2021, the Partnership had a material net holding in Bitcoin of approximately $550 million, excluding non-controlling interests, versus $133.9 million at the end of the prior year period. The increase in the value of holdings was primarily driven by the increase in price, from the prior year end. As a reminder, we actively manage our core digital asset holdings, including our material net Bitcoin holding, to participate in the upside from favorable asset price changes, and mitigate the impacts of adverse movements.
    • During the quarter, the Partnership grew Cash holdings6 to $410.2 million from $93.2 million in the first quarter, as the firm realized gains from select investments, and as short-term market declines allowed more asset-intensive businesses to return liquidity to our core treasury.

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4 

Excluding non-controlling interests (“NCI”).

5 

Represents coinmarketcap.com total cryptocurrency market capitalization quoted price.

6 

Cash holdings reflect Cash subject to trade settlement, as of June 30, 2021 in the amount of $30 million.

Operating Highlights for the Second Quarter 2021, compared to Second Quarter 2020

  • Galaxy Digital Trading (“GDT”) results reflected a solid quarter, with continued growth in trading volumes and gross counterparty loan originations in a period that included significant volatility in digital asset prices.
    • Counterparty trading volumes continued to experience significant growth, increasing 90% from the quarter ended March 31, 2021, and increasing over 560% year over year.
    • Our electronic and derivatives liquidity provisioning, as well as our quantitative trading strategies, demonstrated rapid growth in-line with our counterparty-facing businesses, and delivered increased profitability in the quarter amidst volatile market conditions.
    • While the Company’s counterparty loan book decreased in the quarter ending June 30, 2021 by 15% to approximately $370 million due to lower asset prices in the quarter, the Company grew gross counterparty loan originations in excess of 130% since March 31, 2021 to approximately $1,560 million. The Company also experienced zero defaults and continued to operate with an average collateralization of over 100%, demonstrating consistent institutional-grade risk management practices.
    • GDT also onboarded 64 new counterparties to our trading platform and continues to support additional tokens. We now provide liquidity in 100 cryptocurrencies.
  • Galaxy Digital Asset Management (“GDAM”) reported preliminary assets under management (“AUM”) of $1.42 billion as of June 30, 2021, a 12% increase from the quarter ended March 31, 2021. AUM consisted of $933.0 million in GDAM’s Galaxy Fund Management products, and $489.6 million in the Galaxy Interactive funds.
    • Recent product launches include: Galaxy Vision Hill Venture Fund of Funds I and the second Galaxy Interactive Fund.
    • Galaxy Bitcoin Fund, LP, Galaxy Institutional Bitcoin Fund, LP, and Galaxy Institutional Bitcoin Fund, Ltd. (collectively the “Bitcoin Funds”) track the Bloomberg CFIX pricing of bitcoin (“XBT”), and the XBT has returned 20.37% on a year-to-date basis through June 30, 2021.
    • Galaxy Benchmark Crypto Index Fund LP (the “Index Fund”) is a passively managed index fund that tracks the Bloomberg Galaxy Crypto Index (the “BGCI”). The BGCI has returned 90.58% on a year-to-date basis through June 30, 2021.
    • In May 2021, Galaxy Digital acquired Vision Hill, a premier investment consultant and asset manager in the digital asset sector, to create Galaxy Vision Hill. This adds multi-manager, fund of fund offerings to the Company’s institutional asset management platform through the Galaxy Vision Hill product suite. At acquisition, Galaxy Vision Hill has one fund with $30 million in AUM.
  • Galaxy Digital Investment Banking (“GDIB”) was instrumental in Galaxy Digital’s acquisitions of BitGo Inc. and Vision Hill, Inc., both of which were announced during the quarter.
    • GDIB is currently working on seven active mandates in various stages of execution, with an active pipeline including many more potential deals.
    • Key activities as of June 30, 2021 include efforts primarily in capital raising, given the significant amount of fundraising activity occurring throughout the cryptocurrency and digital assets sector.
    • Notably, GDIB won its first buy-side M&A engagement during the quarter.
  • Galaxy Digital Mining (“GDM”) continued to expand both its proprietary bitcoin mining operation and Mining Finance (“MiFi”) offerings to support the full breadth of the mining ecosystem, while publicizing ongoing commitments to managing its carbon footprint and increasing the use of clean energy.
    • GDM demonstrated continued business model flexibility through both the execution of a resale agreement for its proprietary mining equipment, and the development of a sale-leaseback offering for large mining clients.
    • GDM closed an additional bitcoin-based loan facility, its third bitcoin-collateralized corporate loan to large public miners, for Argo Blockchain.
    • Proprietary mining operations in the second quarter of 2021 benefited from a decrease in network difficulty relative to the first quarter of 2021.
    • Based on forward purchase commitments, GDM continues to expect to achieve up to 1,995 Petahash per second (PH/s) of mining capacity from monthly deliveries through the end of 2022.
    • GDM made public a dedication to managing its carbon footprint and increasing the use of clean energy. As of June 30, 2021, GDM is utilizing sustainable electricity power mix in excess of 69% and has a three-year target to achieve an over-80% sustainable power mix.
  • Principal Investments: The Company now holds 84 total investments across 68 portfolio companies.
    • The Company made 14 new investments during the quarter, adding new portfolio companies like Ramp, Tokemak and Aleo, all of which we believe can be category-defining.
    • Strong fundraising trends within the sector continue to provide the company with flexibility to realize gains opportunistically. In the quarter, the company realized an investment gain of over $2 million from dividends received from portfolio company Bullish Global in advance of its merger with Far Peak Acquisition, a special purpose acquisition company, in July 2021.

Corporate Updates

  • Effective August 4, 2021, the Company has successfully exited the TSX Sandbox program, having met the applicable exit condition of no significant compliance issues for a 12-month period.
  • On August 12, 2021, the Company announced the hiring of Tim Grant as Head of Europe. Tim joins Galaxy from Swiss Exchange SIX Group, where he was CEO of their digital asset exchange SDX. Tim brings 20 years of experience across crypto, fintech, and capital markets, and joins the Company to lead international expansion efforts.
  • The Company announced the hiring of Jennifer Lee as Chief People Officer. Jennifer will join Galaxy Digital on September 27, 2021 from BlackRock, where she most recently served as Managing Director and Global HR Business Partner for Technology and the Chief Operating Officer. Jennifer brings over 20 years of people management, benefits, and strategy experience, and joins the Company to lead talent management and human resources globally.

Earnings Conference Call

An investor conference call will be held today, August 16, 2021 at 8:30 AM Eastern Time. A live webcast with the ability to ask questions will be available at: https://investor.galaxydigital.io/ or directly at: http://public.viavid.com/index.php?id=145822. The conference call can also be accessed by investors in the United States or Canada by dialing 1-877-407-0789, or 1-201-689-8562 (outside the U.S. and Canada). A replay of the webcast will be available and can be accessed in the same manner as the live webcast on the Company’s Investor Relations website. Through September 6, 2021, the recording will also be available by dialing 1-844-512-2921, or 1-412-317-6671 (outside the U.S. and Canada) passcode: 13721694.

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