The crypto world is on the verge of a turning point: The industry is currently eagerly awaiting the comprehensive software update of Ethereum. This digital asset is not only used as a means of payment, but is also a kind of platform through which business processes can be mapped. The developers promise ETH 2.0 more speed with lower energy consumption at the same time. According to experts, this would increase the attractiveness of the second-ranked cyber currency in terms of market capitalization and provide even greater competition for the top dog, Bitcoin.
Whichever of the more than 10,000 cyber currencies will dominate the overall USD 1.5 trillion crypto market doesn't matter to Galaxy Digital. The U.S. company offers a wide range of financial solutions in the digital assets space. The New York-based company divides its business into five divisions: Trading, Asset Management, Investment Banking, Mining and Principal Investments. The company not only has numerous partnerships in asset management and investment banking, all of which operate around and within the blockchain ecosystem. Companies that build digital networks, for example, are also among the company's broad clientele. The goal is to identify companies and networks that will shape the crypto economy in the future.
The fact that the company, which is hardly known in this country, already enjoys a great deal of trust is demonstrated by the latest deal with Goldman Sachs. The investment bank is cooperating with Galaxy, which was only founded in 2018, to give its customers access to the digital asset Ether via the Galaxy Digital Ethereum Fund. With a minimum investment of a quarter of a million dollars, this is an attractive deal. If Robert Bogucki, co-head of global trading at Galaxy Digital, has his way, the flow of capital from the institutional space will continue to increase: "More and more funds are looking at crypto as a fifth asset class."
As of the end of the first quarter, Galaxy had USD 2.7 trillion in assets under management. This was a slight decline of 5% from the previous quarter. Meanwhile, advisory and management fees shot up from USD 1.9 million to USD 11.9 million in the first quarter. On the earnings side, however, the crypto firm suffered losses from January to March. The net loss piled up to USD 111.7 million, compared to a profit of USD 858.2 million a year earlier. However, this decline was mainly due to unrealized losses on digital assets. "Galaxy showed another strong quarter against the backdrop of declining digital asset prices," commented founder and CEO Michael Novogratz on the interim report, adding, "I am proud to see the durability and sustained profitability of our operating businesses, including record contributions from our Investment Banking and Mining segments." In Mining, Galaxy set a new record for revenue of USD 9.8 million, generating a surplus of USD 5.0 million. As a result, a proud net margin of almost 50% was calculated. An even higher return of 72.5% was achieved in Investment Banking.
Even if individual business areas are currently shining with top performances, the high loss due to the consolidation on the crypto market - bitcoin alone lost more than half of its value compared to its record high in November 2021 - turned into a bitter pill to swallow for investors. The title dived by about a quarter on the same day.
With the recent price slide, Galaxy Digital may have priced in the current uncertainty in the crypto market by now. However, volatility is likely to remain high in the coming months, which currently argues against a direct investment. Products with conditional partial protection may now be the better alternative. The new Softcallable Barrier Reverse Convertibles, for example, turn fluctuations into double-digit percentage returns. The CHF version offers an attractive interest rate of 15.00% p.a. with a maximum term of one year, the USD-denominated product even comes with a coupon of 17.00% p.a., which is paid out quarterly. Furthermore, the products are equipped with comfortable risk buffers of 51%. As a result, Galaxy Digital's share can reset even further without diminishing the return opportunity. Only if the barrier is breached could there be markdowns. Then the closing price decides about profit or loss of the investment. If the underlying instrument returns to the starting level, the full nominal value is paid out in addition to the secure coupon. Otherwise, the redemption is based on the performance of the Galaxy Digital share.
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