Mike Novogratz is 53-year-old and a former Goldman Sachs partner and Fortress hedge fund manager. He is trying to create a merchant bank that he hopes will entice institutional money into the uncharted territory of digital money. He is believing that his bank will be the “Goldman Sachs of crypto”.
The crypto markets have seen better days and the share price of Galaxy Digital has dropped by 37 percent since its listing on the Toronto Venture Exchange at the beginning of August and raising $242m. Galaxy Digital also has offices in Hong Kong and Tokyo.
“2017 was just fun, it was almost stupid,” said Mr Novogratz. “But this year has been challenging. It sucks to build a business in a bear market.”
Galaxy Digital main focus is offering advisory services along with mergers and acquisitions and capital raising support. These services are rendered mainly to crypto companies. Galaxy Digital also invests directly into crypto businesses, such as exchanges, through its principal investing arm.
It also of recent set up a trading arm and asset management division. It has about $460m in assets under management, according to its recent results. Industrial expert says it is the biggest project of its kind to date. The project requires a lot of risks and so it is not for the faint-hearted.
“ Staff anxiety levels go up when crypto goes down,” Mr Novogratz said, before adding: “In most traditional business, such as Goldman Sachs, you don’t worry. There’s not an existential threat out there.”
Mike Novogratz’s on his part, has every reason to be nervous. In setting up Galaxy Digital he contributed his entire cryptocurrency wealth, which was about $302m to the company.
In the first quarter of this current financial year the company has losses of $134m. It also weighs down by $85.5m in unrealizing losses on digital assets and $13.5m in losses in its trading business. However, in the second quarter, it made $35m in net income, and losses in its trading arm minimize to £1.1m.
Earlier this month, the business quietly announced the departure of both its president Richard Tavoso and its co-head of trading David Namdar. It also made an announcement of a “repositioning” of its advisory business. It is shifting away from consulting smaller start-ups to serving large, institutional clients. As a result of this, the company is planning to shut its Vancouver office and hire more people in New York.
Mike Novogratz appears unmoved by the present situation of the crypto industry. He also predicts that financial institutions will move from investing in cryptocurrency funds. They will invest in cryptocurrencies proper in the first quarter of next year.
“You’ll see that flip next year,” he said. “That’s when prices start moving again.”