Finally, Galaxy Digital, a prominent 'crypto merchant bank' led by former Goldman Sachs executive Mike Novogratz, has managed to find relief amidst a bearish market trajectory.
A press release obtained According to Blockonomi, the company, which commenced operations during the heights of the last Bitcoin bull run, secured a considerable profit from one of its cornerstone investments in blockchain.
Galaxy Gains a 123% Profit on Crypto Investment
Tuesday's announcement disclosed that Galaxy has offloaded the majority of its stake in Block.one, the innovative blockchain startup and investment vehicle behind the project. EOS protocol, for $71.2 million.
The company has recorded a realized return of 123% on its investment. Although the merchant bank will retain a minor shareholding in Block.one, they plan to continue collaboration with the startup in a variety of ways, including through Galaxy's EOS-focused venture fund, while also supporting the blockchain ecosystem in general. Novogratz elaborated on the rationale behind this recent strategic move:
“The acceptance of Block.one’s tender offer belies a chosen strategy to rebalance the portfolio, ensuring a suitable level of diversification after the position ballooned due to its significant outperformance compared to the rest of the portfolio.”
As previously mentioned, this stands as one of Galaxy's most remarkable achievements so far, particularly since 2018 was a challenging year for the company. As noted by previous reports Blockonomi, Galaxy reported losses of $97 million in the fourth quarter of 2018, increasing from the $76.7 million loss recorded in the third quarter.
According to the report, much of this downfall can be associated with its core investment and trading activities, likely due to the slump in Bitcoin and other digital currencies hitting new lows in November and December, lower than most experts had predicted.
In summary, the firm, largely driven by Novogratz's fortune—allegedly comprising 20% in Bitcoin and Ethereum—suffered a $272.7 million loss during the entirety of 2018. That's quite a setback.
As highlighted in the report, a significant part of these losses resulted from cryptocurrency sales. An examination by Three Arrows Capital’s Su Zhu appears to confirm this, highlighting that the firm sold WAX and Ethereum in late 2018, with the latter having plunged since Galaxy's acquisition.
An analysis of Galaxy Digital's year-end financial statement for 2018 reveals several insights:
1) $BTC now 63%, $ETH 21%, $EOS 11%, $XMR 5%. Exited $WAX .
2) They appear to have acquired ETHBTC in the first quarter, procured ETHUSD and BTCUSD in the third quarter, liquidated WAXEOS in the fourth quarter, and sold ETHBTC in the fourth quarter. https://t.co/Fzc7Ld34xj pic.twitter.com/G0DInou0KX— Zhu Su ???? (@zhusu) May 9, 2019
Nevertheless, this doesn’t mark the conclusion for Novogratz & Co. The findings indicated that by the end of the 2018 fiscal year, Galaxy possessed assets valued at $350 million, with 50% comprising equity or stakes in prominent industry startups.
Novogratz also sought to reassure stakeholders, emphasizing that the financial documents have not reflected the “significant uptick in activity across” Galaxy’s operations in early 2019, likely due to investors’ expectations coming to the conclusion that the market is on the cusp of a rally, prompting a renewed inflow of capital into the crypto space.
In even more promising developments, Galaxy has either launched or is preparing to launch another fund—thought to be furnished with hundreds of millions in financing—that will extend capital loans to crypto companies, an endeavor that thrived during 2018’s bearish market.
Not The Only Block.one Beneficiary
Indeed, a 123% gain in about a year's span is commendable, but another investor in Block.one was recently unveiled to have achieved even more impressive results. Far superior, in fact. Reported Bloomberg reported on Tuesday that Block.one is expected to pay its earliest backers up to a 6,567% return on their initial stake through a share repurchase initiative.
This implies that an investment of $100,000 can yield $6.6 million. This staggering performance prompted Tom Shaughnessy, co-founder of market analysis company Delphi Digital, to declare Block.one as “quite the anomaly in the crypto sector.” It remains uncertain who will receive these incredible gains from the Cayman Islands-based entity, but they are likely celebrating with champagne.
The report detailed that Block.one currently holds a $2.3 billion valuation, encompassing a $500 million cryptocurrency portfolio and an estimated $2.2 billion in cash-like reserves, poised to maintain strong performance as the bull market seems to rejuvenate.
