Blockchain
Galaxy Announces Third Quarter 2023 Financial Results and October Update
Galaxy Digital Holdings Ltd. (TSX: GLXY) (the “Company” or “GDH Ltd.”) today released financial results for the three and nine months ended September 30, 2023, for both itself and Galaxy Digital Holdings LP (the “Partnership” or “GDH LP”). In this press release, a reference to “Galaxy”, “we”, “our” and similar words refer to GDH Ltd., its subsidiaries and affiliates including GDH LP, or any one of them, as the context requires.
Preliminary Financial Highlights, through October 31, 20231
Since the end of the third quarter, digital asset prices materially changed and our business has benefited from heightened market volatility and increased trading volumes. Galaxy’s income before tax was approximately $124 million in the month of October, driven primarily by our market positioning and the appreciation of digital asset prices. Equity capital increased to approximately $1.6 billion over the same period.
Corporate Updates
US Listing and Reorganization: Galaxy continues to work on completing its proposed reorganization and domestication to become a Delaware-incorporated company and subsequently list on the Nasdaq, upon completion of ongoing SEC review and subject to stock exchange, shareholder and applicable regulatory approvals of such transactions.
Share Buyback Program: As announced on May 26, 2023, the Company commenced a new normal course issuer bid on May 31, 2023, and is eligible to purchase up to 10 million ordinary shares. For the period between July 1, 2023 and October 31, 2023, Galaxy repurchased approximately 1.2 million shares at an average price of CAD $4.69.
|
Select Financial Metrics |
Q3 2023 |
Q2 2023 |
% Change |
|
Equity Capital |
$1,466M |
$1,542M |
(5 %) |
|
Liquidity |
$749M |
$696M |
8 % |
|
Cash & Net Stablecoins3 |
$395M |
$468M |
(16 %) |
|
Net Digital Assets4 |
$354M |
$228M |
56 % |
|
Net Income (loss) |
($94M) |
($46M) |
(104 %) |
|
Note: Throughout this document, totals may not sum due to rounding. Quarter-over-quarter percentage change calculations are based on actual results. |
Galaxy Global Markets
Galaxy Global Markets (“GGM”) offers institutional-grade expertise and access to a broad range of digital asset products, including digital asset spot and derivatives trading, structured products, financing, as well as capital markets and M&A advisory services for corporate clients. GGM operates in two discrete business units – Trading and Investment Banking.
Trading
Trading reported counterparty trading revenue of $14 million, down $6 million quarter-over-quarter (“QoQ”). The decrease was primarily due to record low volatility and market positioning. Subsequent to quarter-end, our counterparty trading desk’s market positioning benefited from the favorable asset price movements and significant uptick in volatility and has generated $24 million of revenue in October. Despite the decline in revenue QoQ, counterparty trading volumes increased 70% versus the second quarter and our average loan book size expanded to $553 million.
|
Key Performance Indicators |
Q3 2023 |
Q2 2023 |
% Change |
|
Loan Book Size (Average) |
$553M |
$507M |
9 % |
|
Counterparty Loan Originations |
$117M |
$115M |
2 % |
|
Counterparty Trading Volumes QoQ Change |
70 % |
(29 %) |
N.M. |
|
Total Trading Counterparties |
1,028 |
999 |
3 % |
|
Active Trading Counterparties |
284 |
291 |
(2 %) |
Investment Banking
Investment Banking successfully closed two deals in the quarter, serving as advisor to Gamercraft on its latest investment round and serving as the exclusive financial advisor to Securitize in its acquisition of Onramp Invest, both of which we expect to realize as revenue at a later date. Notably, the team was also selected to represent Prime Trust in Nevada Receivership as part of an ongoing restructuring mandate. Galaxy continues to execute against a pipeline of mandates representing $2.2 billion in potential deal value.
|
Key Performance Indicators |
Q3 2023 |
Q2 2023 |
% Change |
|
Deals Closed |
2 |
1 |
100 % |
|
Pipeline |
24 |
23 |
4 % |
|
Deal Value of Pipeline |
$2.2B |
$1.0B |
120 % |
_____
KEY TERMS
Counterparty Trading Revenue: revenue from counterparty-facing activities from our Derivatives, Credit, Over-the-Counter Trading, and Quantitative Trading businesses, net of associated funding charges.
Loan Book Size (Average): average market value of all open loans, un-funded arrangements to finance delayed trading/settlement (for example over weekends), and uncommitted credit facilities in the quarter.
Counterparty Loan Originations: market values of all loans, credit facility draws, and credit facilities originated to external counterparties in the quarter. Does not include rolled loans as a new origination; rolled loans can be generally defined as loans where the maturity was extended but no other material terms were changed.
Active Trading Counterparties: counterparties with whom we have traded within the past 12 months and who are still onboarded with Galaxy’s trading business.
Pipeline: the number of open engagements and transactions the Investment Banking team is in market with.
Deal Value of Pipeline: the theoretical aggregate deal value associated with the Investment Banking pipeline.
Galaxy Asset Management
Galaxy Asset Management (“GAM”) provides investors access to the digital asset ecosystem via a diverse suite of institutional-grade investment vehicles that span passive, active, and venture strategies.
GAM management and performance fees were $4.7 million in the quarter, representing an 11% increase QoQ. GAM reported preliminary assets under management of approximately $3.9 billion as of September 30, 2023, a 58% increase QoQ. The increase in AUM was primarily driven by net inflows from new actively managed client mandates that came in at the end of the quarter. AUM consisted of $768 million in passive strategies, $1,704 million in active strategies and $1,456 million in venture strategies.
|
Key Performance Indicators |
Q3 2023 |
Q2 2023 |
% Change |
|
Management and Performance Fees |
$4.7M |
$4.2M |
11 % |
|
Total AUM |
$3,927M |
$2,489M |
58 % |
|
Passive AUM |
$768M |
$958M |
(20 %) |
|
Active AUM |
$1,704M |
$103M |
1,548 % |
|
Venture AUM |
$1,456M |
$1,428M |
2 % |
|
Number of Portfolio Company Investments1 |
223 |
217 |
3 % |
|
(1) Includes investments held directly on the Partnerships’ balance sheet and indirectly through the Galaxy sponsored funds. |
_____
KEY TERMS
Assets Under Management: all figures are unaudited. AUM is inclusive of sub-advised funds, committed capital closed-end vehicles, seed investments by affiliates, affiliated and unaffiliated separately managed accounts, and fund of fund products. Changes in AUM are generally the result of performance, contributions, withdrawals, and acquisitions.
- Preliminary AUM associated with GVH Multi-Strategy FOF LP is based on management’s most recent estimate.
- AUM for committed capital closed-end vehicles that have completed their investment period is reported as NAV (Net Asset Value) plus unfunded commitment.
- AUM for quarterly close vehicles is reported as of the most recent quarter available for the applicable period.
- AUM for affiliated separately managed accounts is reported as NAV as of the most recently available estimate for the applicable period.
Passive Strategies: single- and multi-asset private funds, as well as a suite of regulated spot digital asset exchange-traded funds offered through partnerships with asset managers globally.
Active Strategies: Galaxy’s Liquid Alpha strategy and the management of certain bespoke mandates.
Venture Strategies: organized around two investment themes: Interactive Ventures and Crypto Ventures. Galaxy Interactive is GAM’s sector-focused venture arm, managing client capital across three funds. GAM’s Crypto Ventures sleeve invests client capital across two global, multi-manager venture funds and manages a subset of Galaxy’s balance sheet venture investments.
Galaxy Digital Infrastructure Solutions
Galaxy Digital Infrastructure Solutions (“GDIS“) consists of proprietary and hosted bitcoin mining services, GK8 self-custody technology solutions, and validator services.
Mining
Mining revenue was $14.3 million in the quarter relative to power purchase agreement and external hosting expenses, net of curtailment credits, of ($2.2 million). We reached 3.9 exahash per second of hashrate under management across our proprietary and hosted footprint, as we continued to scale our Helios facility in West Texas. Our effective power management strategy led to a negative average marginal cost to mine in the quarter. We expect our average marginal cost to mine to increase in the fourth quarter relative to the third and second quarters in anticipation of fewer opportunities to economically curtail our mining operations and a higher network hashrate.
|
Key Performance Indicators |
Q3 2023 |
Q2 2023 |
% Change |
|
Mining Revenue |
$14.3M |
$15.4M |
(7 %) |
|
Proprietary Mining Revenue |
$8.8M |
$8.6M |
3 % |
|
Hosted and Other Mining Revenue1 |
$5.5M |
$6.8M |
(19 %) |
|
Total Hashrate Under Management |
3.9 EH/s |
3.7 EH/s |
7 % |
|
Proprietary Mining Hashrate |
1.8 EH/s |
1.7 EH/s |
10 % |
|
Hosted Mining Hashrate |
2.1 EH/s |
2.0 EH/s |
4 % |
|
Number of Proprietary BTC Mined |
309 |
307 |
1 % |
|
Average Marginal Cost to Mine |
< $0 |
$9K -$10K |
N.M. |
|
(1) Includes revenue from hosting clients, leasing agreements and other mining related activities. |
Self-Custody and Validator Solutions
Self-Custody and Validator Solutions are focus areas in our continued commitment to the future of decentralized networks. This includes supporting the integrity of protocols and ecosystem projects by operating validator nodes to secure blockchains, and by offering self-custody technology solutions to institutions through GK8.
|
Key Performance Indicators |
Q3 2023 |
Q2 2023 |
% Change |
|
GK8 Total Client Count |
16 |
15 |
7 % |
_____
KEY TERMS
Hashrate Under Management: the total combined hashrate of active proprietary and hosted mining capacity managed by Galaxy.
Proprietary Mining Hashrate: the hashrate attributed to Galaxy owned and operated mining rigs.
Hosted Mining Hashrate: the hashrate attributed to third-party machines operated by Galaxy for a client.
Number of Proprietary BTC Mined: the total amount of bitcoin mined from proprietary mining operations.
Average Marginal Cost to Mine: the marginal cost of production for each bitcoin generated during the period. The calculation excludes depreciation, mark-to-market on power contracts, and corporate overhead.
GK8 Total Client Count: the total number of clients contracted to use GK8’s technology solutions.
GDH Ltd.’s Financial Highlights
As the only significant asset of GDH Ltd. is its minority interest in GDH LP, its results are driven by the results of GDH LP. GDH Ltd. accounts for its investment in this associate (GDH LP) using the equity method. The investment, initially recorded at cost, is increased or decreased to recognize GDH Ltd.’s share of the earnings and losses of GDH LP. During the three months ended September 30, 2023, an impairment assessment was required under International Financial Reporting Standards and GDH Ltd.’s minority interest in GDH LP was marked down based on the TSX quarter-end closing share price. An impairment expense of $44.9 million was recognized during the three months ended September 30, 2023. During the first and second quarters of 2023, the Company had recognized reversal of impairment of $128.1 million resulting in net impairment reversal of $83.2 million for the nine months ended September 30, 2023.
The net comprehensive income (loss) of GDH Ltd. was ($68.8 million) and $83.2 million for the three and nine months ended September 30, 2023, respectively.
Earnings Conference Call
An investor conference call will be held today, November 9, 2023, at 8:30 AM Eastern Time. A live webcast with the ability to ask questions will be available at: https://investor.galaxy.com/. The conference call can also be accessed by investors in the United States or Canada by dialing 1-844-746-0741, or 1-412-317-5107 (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 December 9, 2023, the recording will also be available by dialing 1-844-512-2921, or 1-412-317-6671 (outside the U.S. and Canada) and using the passcode: 10183468.
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Blockchain
Blocks & Headlines: Today in Blockchain (BlackRock, Plume, SEALSQ, Hedera, Deutsche Bank, KuCoin)
Blockchain technology continues to drive innovation across industries, reshaping finance, infrastructure, and philanthropy. Today’s news roundup explores exciting developments in blockchain ETFs, tokenization funding, quantum-resistant chips, public blockchain initiatives, and impactful social projects. Here’s a deep dive into the latest blockchain headlines:
BlackRock ETF Embraces Blockchain with First Muni Bond Purchase
BlackRock’s blockchain-focused ETF has made its first foray into municipal bonds, signaling increased confidence in integrating blockchain technology with traditional finance. The ETF’s strategic investment demonstrates how blockchain can enhance transparency and efficiency in bond markets.
By tokenizing municipal bonds, BlackRock aims to simplify trading and settlement processes while reducing associated costs. This development underscores the growing role of blockchain in transforming financial instruments and fostering greater market accessibility.
Source: Yahoo Finance
Plume Secures Funding for Tokenization Platform
Blockchain fintech company Plume has raised significant funding to advance its tokenization platform. The company’s innovative approach enables businesses to convert real-world assets into digital tokens, streamlining asset management and unlocking liquidity.
Tokenization is rapidly gaining traction as a game-changer in sectors such as real estate, art, and commodities. Plume’s success reflects a broader trend of investment in blockchain solutions that bridge the gap between traditional assets and decentralized technologies.
Source: Fortune
SEALSQ and Hedera Partner for Quantum-Resistant Blockchain Chips
SEALSQ and Hedera have announced a groundbreaking collaboration to develop quantum-resistant chips designed to secure blockchain infrastructure. These advanced chips will provide robust protection against future quantum computing threats, ensuring the integrity of blockchain networks.
As quantum computing capabilities evolve, safeguarding blockchain ecosystems becomes increasingly critical. This partnership highlights the importance of proactive measures in maintaining the resilience and trustworthiness of decentralized systems.
Source: The Quantum Insider
Deutsche Bank’s Public, Permissioned Blockchain Initiative
Deutsche Bank’s Layer 2 blockchain solution is set to go public and operate as a permissioned network, according to its tech partner. This initiative aims to strike a balance between accessibility and security, leveraging blockchain to streamline financial services and enhance operational efficiency.
The decision to adopt a public, permissioned model reflects a growing trend among enterprises seeking to harness the benefits of decentralization while maintaining control over sensitive data. Deutsche Bank’s approach could serve as a blueprint for other financial institutions exploring blockchain adoption.
Source: CoinDesk
KuCoin’s “Light Up Africa” Initiative Brings Hope to Thousands
Cryptocurrency exchange KuCoin has made a significant impact through its “Light Up Africa” donation ceremony in Ghana, benefiting 36,000 children across the continent. The initiative combines blockchain technology with philanthropy to address energy poverty and support education.
By leveraging blockchain for transparency in charitable contributions, KuCoin sets an example of how the crypto industry can drive meaningful social change. The project demonstrates the potential of blockchain to empower communities and foster sustainable development.
Source: PR Newswire
Industry Implications and Key Takeaways
Today’s developments highlight the transformative potential of blockchain across multiple domains:
- Integration with Traditional Finance: BlackRock’s ETF underscores the synergy between blockchain and established financial systems.
- Tokenization Trends: Plume’s funding success reflects the growing demand for digital asset solutions.
- Quantum-Resistant Technologies: SEALSQ and Hedera’s partnership addresses emerging cybersecurity challenges.
- Enterprise Blockchain Adoption: Deutsche Bank’s public, permissioned network showcases the adaptability of blockchain in financial services.
- Social Impact: KuCoin’s philanthropic efforts illustrate blockchain’s capacity to drive positive societal outcomes.
The post Blocks & Headlines: Today in Blockchain (BlackRock, Plume, SEALSQ, Hedera, Deutsche Bank, KuCoin) appeared first on News, Events, Advertising Options.
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