Galaxy Digital Holdings Ltd.

Good morning and welcome to Galaxy Digital's Shareholder Update Conference Call. We're joined today by our Founder and CEO, Mike Novogratz; President, Chris Ferraro; and Chief Financial Officer, Ash Prithipaul.

Before we begin, please note that our remarks today may include forward-looking statements. Actual results may differ materially from those indicated or implied by our forward-looking statements as a result of various factors, including those identified in our filings with the Canadian Securities Regulatory Authorities on SEDAR, and available on our website.

Forward-looking statements speak only as of today and will not be updated. In addition, none of the information on this call constitutes a recommendation, solicitation or offer by Galaxy Digital or its affiliates to buy or sell any securities, including Galaxy Digital securities.

With that, I'll now turn it over to Mike Novogratz.

Good morning, everyone. A very different tone today than I've had on probably the last eight of these calls.

We started Galaxy two, three years ago with this idea that we'd be the bridge between institutional investors on the crypto community. And with hindsight we were a little early and we waited and we waited.

And finally the rain has come. And the world could not more different today than it did six months ago for our company and for the whole crypto business.

COVID in many ways is horrible for the world and continues to be horrible for the world as we see it kind of exploding back over in the U.S. But what it was really an accelerant for the cryptocurrency business for bitcoin, for blockchain, for everything that we do.

And so since April, we've changed our tact from having been cautious to having – to becoming very aggressive. I see an unbelievable opportunity for our company and for the space.

Bitcoin is trading 16,300. It's trading like that not because there's a speculative mania going on.

It's trading like that because institutions, hedge funds, high net worth individuals, family offices are all moving into bitcoin. They're moving in as a store of wealth, they're moving in as an inflation hedge, they're moving in because it's become an institutional asset.

And so our thesis that we would be this bridge between the institutional world and crypto world is finally playing out. What are we doing about it?

We've brought in Damien Vanderbilt to be a Co-President. He's a five-year partner at Goldman Sachs.

We brought in Michael Ash to help us run investment banking. We brought in just announced today two acquisitions, which I really look at is Aqua Hires, for talent and for technology, Drawbridge Lending with Chase & Urban and Blue Fire with Andrew Caros.

We brought in Fabiano in to build a mining business. And we're hiring.

We got to help one sign out there at 107 Grand here in Soho. And so I couldn't be more excited.

I think the opportunity is real. It's not going away.

And I don't think this is a flash in the pan. In 2017, we had this speculative mania we were all worried about.

This is very, very different. When Paypal announced they were getting to the business that's 320 million accounts.

It sent a shockwave across all financial institutions that said we need to be in this business. And since then we've had almost every financial institution we know either reach out or reach out to people we know how they're going to get engaged in this space.

And so this is kind of the first inning for the institutionalization of crypto and we think we're really well prepared for it. We've built a tremendous amount of domain expertise amongst our businesses.

We know the game. We know how it works.

We think we know where it's going. And so I'm going to leave the details to Chris to kind of take you through our earnings.

We had a good quarter. We're having a better quarter in the fourth quarter as you can imagine.

But crypto price is going higher and all the activity. But I want to really be clear that we're in growth mode.

We see blue skies ahead and couldn't be more excited for the business.

Thanks Mike. Chris?

Yes. Thanks Mike.

Hey. Look, so Galaxy Digital has had -- we've had the most active six months in our history.

And certainly this past week has been no exception. We closed on our $50 million pipe financing, with a great roster of institutional investors, including Slate Path, CI, Coriante and the NZ funds.

And as we also announced this morning, we took a critical step forward with the acquisitions of DrawBridge Lending and Blue Fire Capital. I'll walk through our strategic rationale for these acquisitions momentarily.

But first, let me share what we're seeing in the market that's motivating our decision to continue to reinvest behind our leadership position in the space. As Mike mentioned, 2020 has been the turning point for crypto.

Institutions of every kind are publicly discovering and advocating for crypto, not just as a new digital payment rail or as the new decentralized supercomputer, but also as a low correlated asset within a broader investment portfolio. These institutions now publicly include some of the largest global multi-asset investment funds, fintech giants, Facebook, PayPal, Square, corporate treasuries and global central bankers now giving serious consideration to digitally native issued currency.

We're incredibly excited about what's happening in our sector. And so as we go through these results and our strategic considerations going forward, this high conviction moment among both crypto practitioners as well as new institutes entering our community should resonate hopefully as a common driver underlying our results, our hiring plans and our growth decisions.

As Mike mentioned in Q3, Galaxy reported comprehensive income of $44.6 million, which adds to the prior-period profitability, leads us to $55.4 million of total comprehensive income for the year-to-date period and that's through September 30. This reflects year-over-year revenue growth in Q3, 2020, versus Q3, 2019, across each one of our operating business lines, as well as net realized and unrealized gains from digital assets and our investing activities, which, also, this quarter included a partial realization on our stake in BlockFi, which successfully completed its Series C financing this quarter in a significant up round from our last investment, after continuing to demonstrate phenomenal growth.

Another congrats to Zac, Flori and the entire BlockFi team. Now turning to our business units.

In our trading business we continue to win market share and grow our client and counterparty-focused derivatives and electronic trading activities, resulting in our OTC trading desk facilitating over $1.4 billion of quarterly volume, amounting to our largest quarter in our operating history. Q3 OTC volumes represented 28% sequential quarter-over-quarter growth over Q2, 2020, and over 75% compared to last year's Q3.

Galaxy's continued growth in market share as a result of being one of -- our being one of the go-to trading desk in crypto, able to address the bespoke needs of sophisticated institutions looking for a large audited trading partner. To that end DrawBridge Lending and Blue Fire Capital represent important acquisitions for Galaxy Digital trading that slot easily and efficiently into our leading GDT platform, by amplifying our advantages, filling in gaps in our current offerings and securing additional best-in-class talent.

Let me take a moment now to explain the strategic rationale behind these deals and what trading at Galaxy will look like in the months to come. DrawBridge is an innovator in digital asset lending, borrowing and structured products, while Blue Fire is a technology-driven proprietary training firm, specializing in market-making and two-sided liquidity for digital assets.

Both firms are located in Chicago and led by seasoned market veterans. The prior benefits to Galaxy to do to these transactions to us are clear.

First, this combination further expands trading's activities beyond just our current OTC offering and allows us to accelerate towards our goal of providing a full-service single-dealer platform to the market, including expanded derivative and future trading, on-exchange market making, lending, borrowing and structure products, as well as prime brokerage-like services, including trade execution, clearing and settlement and margin-based trade financing. Second, Galaxy Digital intends to leverage our brand institutional relationships in our publicly audited balance sheet towards scaling DrawBridge's suite of unique lending and structured product offerings.

It's important to note here that we've already been in business with DrawBridge for some time and we know the team very well. We made an investment into them in 2019 and have built a growing live loan book together which we intend to expand growing forward as a result of this transaction.

Next, we intend to point Galaxy's broad sources of liquidity toward Blue Fire's best-in-class trading strategies and execution, while further enhancing their superior relationships with key global crypto exchanges that arises out of their 40-plus-billion-dollars of annual notional spot derivative trading volume. We expect Blue Fire to help us drive the utilization and optimization of our balance sheet, as well as drive trading costs down across the entire platform, which can then in turn be passed on to our clients to provide lowest cost execution and highly efficient financing options.

Organizationally, these deals establish a strong regional hub in Chicago for Galaxy Digital, to expand agency, prime brokerage and electronic trading services and to increase connectivity with the largest global exchange players and traditional derivatives firms, as they look to move into the crypto markets with Galaxy as a blue-chip partner. Finally, DrawBridge's CEO and Co-Founder, Jason Urban, will join Galaxy Digital as Co-Head of Galaxy Digital Trading and will work alongside fellow CO-Head, Pete Wisniewski.

Andrew Karos will remain the CEO of Blue Fire, which will continue to operate as a wholly-owned subsidiary of Galaxy. Jason and Andrew are both veteran traders with Jason having run significant businesses at both Goldman Sachs and DRW and Andrew having built his own firm with a decade-plus long successful traditional equity derivative trading track record prior to turning attention to crypto in 2018.

But beyond Jason and Andrew, we're very excited about the addition of the entire Drawbridge and Blue Fire teams to the Galaxy family. These additions will increase our resources in the trading business by over 50% and an important strategic move necessary for us to meet real on-the-ground demand head on today.

Turning to the asset management business. The second quarter of 2020 has continued to see heightened market demand for bitcoin and other major cryptocurrencies, against the backdrop of excessive global monetary stimulus on the one hand and major investors, corporates and regulators increasingly expressing their conviction in the long-term prospects of bitcoin to store value on the other.

We have built our strategy around institutional wealth channels and accredit investors and are seeing promising initial traction as our brand marketing, investor education and partner sales channels begin to amplify one another. As of October 31, our passive index at bitcoin funds crossed $120 million of AUM and is growing fast.

Also in the third quarter our Galaxy Interactive, Venture Capital team who manages the Galaxy ESVC fund within asset management continue to expand their leadership role in the interactive content space and up the pace of their investing over the second quarter with nine new investments and four follow-on investments. Turning to Galaxy Digital Investment Banking, which has continued to build its pipeline of mandates and to deliver first-class execution to clients including representing Blockfolio in its $150 million sale to FTX.

As we communicated on our last call, we were committed to managing the leadership transition in this group before the end of the year and we have succeeded in doing so. In the past several weeks, we've brought on a new Head of Investment Banking, Michael Ash, who has previously built multiple industry-focused businesses before at both Citi and Oppenheimer.

We're also excited to launch Galaxy Digital Mining, which has come out of the hard work of the advisory team over the past year and will now be led by another new addition to Galaxy Amanda Fabiano. Amanda was at Fidelity Investments for the past six years focused on mining bitcoin products, bitcoin education.

I have not personally had the pleasure of working with both Michael and Amanda for the past few weeks and I'm confident that we have found the two best individuals to fill these roles. I'm very excited to see what both of these teams are going to accomplish here at Galaxy in 2021.

Finally, in terms of our firm balance sheet and our principal investment activities, our team has continued to pursue differentiated new opportunities. The team invested $7.5 million of total new capital and six new and four follow-on investments in the third quarter including in two of the most prominent DeFi or decentralized finance investment funds in the sector, ParaFi Capital and Robot Ventures.

With that I'll turn it over to Ash to walk everyone through the specifics of our financial performance in the third quarter. Ash?

Thanks, Chris. I'll provide some additional details regarding our financial results for the quarter.

Our comprehensive income for the three months ended September 30, totaled $44.6 billion with a comprehensive income over nine months amounting to $55.4 million. The current quarterly gain was primarily a result of realized and unrealized gains on digital assets and other investments partially offset by operating expenses.

The first quarter 2020 figure includes $3.3 million of equity-based competition expense, which is a non-cash charge and has negative effect on equity. This brings our total equity or net book value to $445.6 million as of September 30 or CAD 2.05 on net book value per share or $1.54 of net book value per share.

As of September 30, the number of compensatory costs per units and stock options outstanding were 17.2 million and 21.4 million respectively. The aggregate compensatory awards have a value of $8.1 million remaining to be amortized over their life.

Operating expenses for the three months ended September 30 were $17 million inclusive of equity-based compensation of $3.3 million over the same period. Operating expenses were lower for the three and nine months ended September 30, 2020 as compared to the three and nine months ended September 30, 2019, due primarily to lower equity-based compensation and lower competition expense in 2020.

Regarding our balance sheet, $7.5 million of new and follow-on investments during the third quarter brought the investment balance to $200.7 million. As of September 30th, we held 45 individual investment positions excluding our cryptocurrency and pre-FT Holdings with no single investment position representing more than 6.6% of our net asset value.

In regards to the brokerage lending and Blue Fire capitalizations, the consideration includes 3.8 million of ordinary shares, subject to customary purchase price adjustments and the company intends to grind five million contingent options to certain employees joining the company at incentive and retention awards. We're pleased to report that we had $144 million of liquidity at the quarter end.

Our liquidity includes our working capital and net digital assets, which is then netted against forward commitments and projected future expenses. Our current liquidity example will allow us to continue to operate the business and take advantage of market opportunities.

With that, I'll now turn the call back to the operator, so we can address questions from our equity analysts and investors. Operator any questions from equity analysts?

Excellent. Thanks for taking my questions.

Nice to have a positive backdrop in the crypto space within your conference call. Just want to jump in on the acquisitions.

It looks like you're paying shares and options for the acquisitions and there's no cash portion. So I assume you guys still have this $450 million financing at your disposal.

What are plans for spending? How do you carve that up into different parts of your strategy?

And what can we look forward to there?

Sure. You want me take that Mike?

Yes. Take that Chris.

Yeah. So the -- you're accurate in terms of the purchase consideration for the acquisitions, and therefore the pipe financing was all primary capital that's being added to the balance sheet.

That capital primarily will go towards financing different businesses inside the trading business, as well as helping to launch and start-up and add financing to the mining business as well. And so when you think about us expanding our structured product offering, expanding our financing of customer trades and trading and margin based financing and things like that, as well as adding capital to the existing trading strategies of Blue Fire, you should think about that as the primary use of proceeds for the pipe.

Okay. On the acquisitions Blue Fire and Drawbridge, what can we think of in terms of the financial impact?

I mean, can you share any of the income and profitability metrics that these guys have been playing on the growth rates and how you might accelerate that going forward? Any kind of color impact, any color on potential financial impacts would be helpful.

Yeah, sure. So the -- we'll speak to and report their performance is going forward in time.

Right now we're focused on adding them and integrating them into our existing business quite quickly. And so the -- some of the specifics that we've disclosed we could talk to is on the Drawbridge side, they bring over $150 million of third-party assets that are being managed in various products and forms to the platform on day one.

And in fact, they've been a part of a driver of our existing book as well over the last year as we partner with them on adding different financing assets onto our balance sheet. And on the Blue Fire side, Blue Fire is one of the largest global market makers on exchange on a run-rate basis trade over $40 billion notional annually of crypto.

And so you should think about that going forward as being an engine that's going to generate consistent high alpha return on equity based on the amount of capital we put behind the business. And so we expect both of these to be additive to the business and accretive from an M&A perspective over the 18-month period on my end -- on the long end.

And so -- but we're going to sort of integrate them and see how it fits into the business going forward.

Deepak, it's Mike here. The one thing I would tell you is that some ways, the way I look at these things these are aqua hires of really, really talented guys at a time when the business is starting to have slowed.

And so you look at Andrew's engine that he's built plugging our capital and plugging into some of that we already have and think it might be 18 months, it might be 12 months, it might be six months based on the amount of volume that's pumping through these markets all of those side and I don't think it's going to go away. The same thing with the derivative business that Jason Urban is bringing over in the lending business.

Demand is going way up. I mean we're having a hard time hiring people fast enough to build out.

Listen, there's competition as well, right? Our competitors are doing the same thing.

And so what's exciting from my perspective is we were in a very nascent industry and it still is. But now you're pretty certain that there are going to be multiple players that are building out real teams and this is going to be a real business.

And so in lots of ways, our business plan has been de-risked. The bitcoin ecosystem has been de-risked.

And so that volatility in kind of light come down, right, there's no existential threat all of a sudden that you made the wrong bet that's going to take too long the regulators are going to screw you. And so now it's really a race to take the right people in the right seats and to early start kind of looking six, 12, 18, 24 months ahead where the ball is going.

And so I'm wary of past performance, predicting future performance in this case, because, I think future performance could be a lot better than past performance.

Okay, thanks Mike. That's really helpful.

You mentioned existential threats. I mean how do you look at the DeFi space right now in terms of existential threats?

I know you put some money to clarify--

We're doing a lot of that in-house. And I think come next earnings call; I think we'll roll out more of our DeFi plan and how we see DeFi.

DeFi is funny word. Really what DeFi really is, is we're taking a blockchain to the financial services industry.

And it is by far the biggest threat to the banking system. It's just early, right?

It's a sandbox still. It's a growing sandbox, right?

It's gone from $500 billion [ph] locked up to $12 billion -- $500 million to $12 billion. But we're still in I call the sandbox stage.

And so we've got some of our smartest guys in the firm working and making investments in that space and early structuring on how we participate in the space. And I think 2021 -- certainly in 2022 is going to be a driver of things around here.

But right now, we're still in that kind of -- first in DeFi.

Got it. So, I'm curious if we have a kind of $1 billion cycle with DeFi like we saw in ICOs, do you think that the bitcoin and mature cryptocurrency market is insulated from that?

I think we've passed that stage where everything is kind of correlated to a single event?

I do think so. Look, I would split into three buckets.

I would talk about a bitcoin as a macro asset. It's almost a cottage industry that I think has reached escape velocity.

And we're trading at 16,000 today. It would be surprising to me if we don't take the old hives out relatively soon.

And people who are working where bitcoin goes. And at 16,000 bitcoin, we're only 10% of gold.

JPMorgan just put out a paper talking about bitcoin as alternative to gold and they're seeing clients want to take the substitute. So, I don't even sure why 10% is the great bot.

Yes, I think that's badass. In five years, 10 years, we're going to be looking back and saying well bitcoin is more than gold.

And so this is a multiyear process of adoption in bitcoin. But I really believe we crossed escape velocity.

And then when you look at everything else right, Ethereum blockchain, price of Ethereum is going higher. I think it will continue to go higher.

The Ethereum blockchain it is most likely a blockchain that everything else gets built on. So, where DeFi will reside, where stable coins will reside.

Central Bank-issued digital currencies are going to be a thing. Every single Central Bank is talking about them trying to figure out including the U.S., including Europe, including Brazil.

And so we're going to a see rebuilding of the financial architecture of the U.S. and of the world over the next 10 years -- 10 to 15 years -- five to 15 years.

And the blockchain is going to be a monster part of that, the ecosystem and these projects being built on top of that. And so I kind of look at it as Ethereum payments as kind of chapter two, but it's really correlated in all these new projects, which you want to think about DeFi peer-to-peer, derivatives peer-to-peer, interest rate trading peer-to-peer, futures trading peer-to-peer, equity trading.

And listen there's a regulatory hurdle to go through that's not been worked out. And so the regulators have to catch up with the technology.

The technology has got to fit itself into a regulatory framework. I'm confident that will happen over the next few years.

And so I flip my mind like half of our business was kind of focused on this opportunity that's here today, which is this bitcoin really becoming global asset. One day if you're lucky it's the global reserve currency, but really becoming a global asset.

And the second is this giant venture bet, which is wildly exciting what we're going to see a real rebuilding of the financial services business. In a few years DeFi and fintech you'll just call it fintech.

And so I think in some ways there are two businesses that are very interconnected. But you can think of them as two growth drivers.

And so that's the way I think about it. And I think listen there's going to be great opportunities on both sides.

Got it, got it. And so when I turn focus back on to your operating business, I know you've got good success on your principal book year-to-date.

What are your thoughts then on reaching breakeven on the operating side and when you get exit velocity in terms of profitable growth there? Any changes now that the markets have been harder?

Yeah. Look I will be disappointed if we don't do that next year and then some, right?

The banking business should be closer -- or might even make it this year. Trading we put a big investment in and it hasn't gotten there yet.

It has certainly if you include our proprietary trading. But I think by next year, we certainly shouldn't have cross that threshold.

Asset management will be the one that will take a little longer partly because it's a game of big numbers and you're putting an investment and you need scale there. And so we’re getting there.

Our asset management business is finally picking up. Listen we took a track of going for the wealth channels.

They're finally moving in. And so I'm optimistic.

We've got lots of partnerships that we are working on, some that have been announced, some that are coming. And so I think give us some patience on the asset management side.

But when you put the three together I would certainly hope that we're operating at a profit next year on an operating basis.

Excellent. Well, I don't want to dominate the call.

I don't have another analyst here in the ring. So I'm going to jump back in the queue.

And then if there's more questions later then I'll jump back in.

Thanks, Deepak.

Thanks, Deepak.

Hi, good morning. I'm thinking of Galaxy as a bit of a leading indicator for other investors.

And you're investing activities recently said you've done a number of recent investments. Can you talk about what you're seeing out there in valuations and competition for the deals that you're going after the investments you're making?

Yeah. So most of the investments we've -- most of the investments we've been making are in the -- we'll call it the D5 space.

And their -- the gain there is to find the best teams with the best ideas and to kind of fight hard to get in a good valuation. We made an investment in a company called One Inch.

We made an investment in a company called Lumina in Korea that -- and what's interesting about the way topic work, right, bitcoin is store value and it's valuable, because it's valuable. And Ethereum has this potential to be the oil or the gasoline of the -- that powers this whole ecosystem.

But the cool thing about a lot of the DeFi project is they trade more like equities. They're almost a dividend.

And so you can look at as this business grows, there's going to be some dividend, which is decided by the community and you can kind of discount cash flow. And I think you're going to see more and more people, traditional investors attracted once these companies become up scale to the space because it's a little easier to intuitively figure out.

And so we're making small investments in and around the space. These are early venture investments that if you're lucky either 6 to 18 to 110 to 150 to 1s [ph].

And what ends up happening is as they mature, hopefully then you become a participant in they're part of the ecosystem, so staking coins on their system or lending money into their system or buying insurance from their system. And so I think it really becomes a symbiotic ecosystem in time.

But that's kind of where our – that investment dollars have gone. Other than that we continue to have a large cryptocurrency position that – I used to trade it pretty actively.

I really believe that we're in a structural shift here and that the crypto guys call it HDLG [ph] "hold on for dear life" just not trading as much watching the appreciation. And so I think we'll probably just hold on to our bitcoin position, if not at times just because we're seeing so much demand for it.

All right. And that demand – how is the investment banking pipeline looking now versus say three or six months ago, just especially in context with the strong new hires you've made.

I think you said you could get profitable in that business this year. Does that imply that there's a really good pipeline?

Yes. So – sorry go, Mike.

I apologize.

You go ahead, Chris. You got it.

I was going to say, we anticipated having a little bit of a kink in our pipeline because we transitioned Ian out and we brought Michael on. That was our anticipation.

The reality is actually – the pipeline has stayed constant and has grown because the existing team that's there has built up a lot of domain expertise. And it's right at the right time, when there is there is a significant amount of both consolidation internally within the industry as well as external interest to look into the industry for potential acquisitions.

So when we think about our pipeline it's – the focus of the business today right now is on M&A. That's where the biggest opportunity is.

We hope to and we expect to see the capital markets side of the business start to expand but it's still young and early in the capital markets days for crypto. And so – we said this in the past I'll say again there were two crypto IPOs.

IPOs historically, we were a part of both of them. We may see some more coming next year but it's young in that side of the business.

So think about it as a corporate advisory and M&A environment and the expertise we've developed there has started to position us quite well, we think.

That's great. And maybe one last question for me and I'll pass the line.

The acquisitions you made I think suggested there are maybe as much acquihire as they are to get trading volume. Any sense of the share that you have now in this market as it's – I think you said inflection are growing?

And then I'll pass on. Thanks.

Yes. Yes.

Yes. So on the – now with the addition of Blue Fire, we expect we will be – we will start off as and then expand and be a top five market maker and participant on almost all the biggest global cryptocurrency exchanges.

And our share there should expand quite dramatically as we put more of our balance sheet behind Andrew and the Blue Fire team's efforts started right out of the gates. Our OTC business today I – there's not a ton of industry data on this.

Our volumes, as we said sort of grew almost 30% quarter-over-quarter in a time when the industry volumes actually were flat to slightly down. So our share of the OTC market is we think is clearly growing.

But really what we see is all white space in terms of capturing white space that isn't really share taking today, which going forward is going to be on onboarding clients and providing different kind of trade financing and margin-based financing and prime brokerage services. So that's largely been held just in custody to date, and we think it's going to expand up the stack beyond custody pretty quickly.

And that's kind of right where our sweet spot is. And so that's why the addition of these teams helps us to be in a position to meet that demand and do it at efficient and low cost which is the key that we think we need to be able to offer to clients to really want to make it the best place to trade.

Very exciting. Thanks for the color gentlemen.

Thanks guys. Thanks for taking my follow-ups.

Chris just on the last comment there on the OTC volumes. So, the volumes are going up.

Your market share is presumably going up or you're grabbing more of that white space. What are you seeing in terms of trends in spreads and commissions?

And can you give us a sense of a target ROE versus what you achieved a year ago?

Yes. Yes, so hard on target ROE side because the business is still scaling, right?

So, it's certainly on a trade level, we're profitable. On a business level, we're scaling into profitability, which Mike pointed out and is clear.

The OTC business sort of margin profitability-wise has been pretty consistent now for the last 18 months. It's a thin business in the largest most liquid ubiquitin and it gets sticker as the market gets less -- there's less liquidity in assets to market there.

But really like the OTC business for us is an important bedrock in the business. It's something that we think will always be demanded and is something that where we can on a one-off basis provide a big block trade liquidity for our biggest and best clients.

That's where the business was historically. Where we want the business where we will drive the business to go and we think is the most interesting both for us as well as market participants it provides higher margin opportunities for us is going to be in this concept of single-dealer access to a variety of suite of products that include much more capital-efficient trading through financing as well as different structured products different esoterics around the spot.

And we're starting to see a real pickup in demand and interest level in all those things. It's on us to really hone our productization of that in a way that we can roll out scalable for the market.

So, it's a growing scaling business for us today. But really the go forward our expectation is that the amount of volume horizontally and vertically across different products and the margin capture for us is going to expand all at the same time right as the platform grows.

That's the trajectory that we have slated for the business.

Okay. And I got two more if I may.

I just want -- can you enter a bit more clarity on the mining strategy? You had some investments in miners in the past.

And then you kind of shifted the narrative to be more of an advisory focus on the mining industry in terms of M&A and financing. And you've got someone on board.

What's the go-forward strategy you're providing?

Yes. Yes.

So, the -- our new sort of our reconstituted mining groups specifically is meant to be an industry vertical that stretches that horizontally across everything we're doing at the firm. And so that group will themselves -- we will actually do some proprietary mining ourselves because this all came out of the advisory group's work in laying out all the players in the space where all the hash rate was what the levelized cost of production could be and should be and sort of really think through the economics of bitcoin mining.

We think it's actually a great time to be in the bitcoin mining space right now. And so you'll actually see that group procure hardware for ourselves as a base investment into the business.

And then from there, the idea would be is going to be for us to sort of use that access to equipment and the relationships with equipment providers to then provide different kind of leasing and financing opportunities to people who want to get into the mining business themselves and so we've internally dub the name MiFi, Mining Finance. And so, that will be a core component of that group.

But that group's responsibility is also still to provide -- to maintain coverage of the biggest and most interesting mining participants across the space and make sure that where we can be helpful, whether it's with our trading desk in terms of coin liquidation or hedging strategies, whether it's in our financing teams are more bespoke. Like, historically, our HUD A style financing that we did or in the investment banking group, if there is a capital raising opportunity or an acquisition opportunity or a project financing opportunity to make sure that those relationships get slotted into the experts within our different businesses, so that we're capitalizing on the whole space.

So that's the task that Amanda and the team have in front of them and we're super excited about it, because we think it's -- the space is ripe for new investments in an organized and professional way. And the economics are there.

Interesting. I mean, it's pretty capital-intensive.

Have you got a number that you want to invest in, in terms of capital equipment?

We're debating it now internally. Amanda and the team have a number.

That's for sure. So, yes, look, it'll depend.

We're definitely going to allocate some balance sheet to it. Some part of the pipe proceeds is going to go towards that first investment into the business.

It's not going to be -- it's going to be all of the pipe financing. It will be a small amount of it.

And then, from there we'll see how the market demand develops for different financing products and that will determine sort of how much capital we ultimately put into the business, right?

Got it.

My expectation is that it will be a very interesting place to be investing capital for the next year at least, for sure.

Got it. And my last question is for Mike or you, is on the M&A side.

Like, do you think the -- there's been anticipation of a consolidation in the industry for a lot of the players that started up or grew through the 2017 growth period. Have we broken logjam there, or is that going to start to accelerate?

You guys are acquiring, we expect, more consolidation there? And then I’ll pass on.

Thanks again.

There's going to be more consolidation. I think you're going to see consolidation within the crypto community, crypto companies.

And you're going to see the tech companies looking to acquire domain expertise. I mean, it's not lost on -- it shouldn’t be lost on you that PayPal, which is a giant tech company, ended up hiring a crypto company to help them implement their crypto strategy, right?

Because there's just domain expertise that they need to either build or buy and it's going to be quicker for a lot of these tech companies who are all going to run and need blockchain and crypto expertise. And so building that domain in crypto is going to be worth a whole lot and you're going to see that happen in the M&A space.

Okay, great. Thanks again for taking all my questions.

I appreciate all your time today.

Yes.

Yes. Thanks.

We are getting a lot of good questions. Let me turn to the first one.

First question we have, bitcoin is on a tear and is now above 16,000. Where does it go from here?

I said this in my earlier remarks, I think the first obvious stop is 20,000 of the old highs. My kids are laughing as I tweeted that I would get a tattoo of the moon on my shoulder.

And so, maybe that happens before January of next year. Listen, when markets are breaking out and moving like they are, you don't know exactly when they take their first pause.

The 20,000 is definitely the next checkpoint. Like I said earlier, I do think bitcoin at 16,000 is 10% of gold.

And that's a good next stopping point. Is that 18 months?

Probably its 18 months, 12 months, 18 months. But when people used to make those predictions, I would say, that's kind of wacko prediction.

What can they hang it on? And now I think these are rational predictions.

10% of the gold doesn't seem that far of a stretch. And I think once you get there, you'll probably be readjusting it up over the next two, three, five, 10 years.

And so, I really believe we've crossed this adoption hurdle and now it's just a question of more and more adoption. And as this kind of goes viral, right, it's the network effect.

I think the most important thing to watch in some ways is just how much crypto was being bought on PayPal every day. Right now, it looks like its $10 million to $12 million to $13 million a day and that accelerates.

And you're seeing being bought on the Square app. You're going to see it bought in funds like ours and in other funds.

It's getting put away. If there's only 21 million bitcoins, there will only be ever 21 million bitcoin and it's a scarce asset.

And so when demand exceeds supply, because supply is roughly getting soaked up so quickly prices go higher.

All right. Next question.

What do you make of the volatility and valuation in DeFi? Is this a repeat of the ICO boom in 2017?

Yeah. We had a -- what I call a tempest in a teapot.

The idea is so powerful. The idea of DeFi is so powerful that people got wildly excited about it in a short period of time.

There were some hike. There were some bad projects.

And we saw what I would call a mini speculative two months up and down bubble. And I think you don't want to lose track over the broader trend.

DeFi is in the first inning. There are some amazing projects that are going to be built.

And in two or three and four years' time, we're not even going to call it DeFi. Like I said we're going to call fintech.

And so I think you got to keep your eye there, you've got to be investing there. Certainly there'll be more kind of trading opportunities when things get overhyped.

But I wouldn't let the volatility scare -- I'm certainly not letting it scare me away or scare Galaxy away. I think we're going to make a big commitment in that space and think it's part of the future.

All right. Our next and final question.

There are a number of corporations who have indicated they will move partially from cash to bitcoin. What is your expectation of how fast treasurers will move to adopt bitcoin?

My favorite TED Talk is this one about the guy dancing on the street, on a hill, a green hill with a grass and he's dancing like a complete lunatic and everyone is looking at him. They're probably 75 people sitting on the hill having a picnic and looking at this maniac.

And then all of a sudden a second guy goes up and starts dancing with him, and then a third, and then a fourth and then the whole hill is dancing like maniacs. And it says a movement has started by the second guy or third guy.

And we're seeing that right? You saw Michael Saylor with his company and then Square.

We don't get credit. We were the first company to actually a little bit go on our balance sheet.

But we're a crypto company, so people respected it. I think there are probably companies that we haven't heard of that already have it certainly private companies, but I think it's going to become a trend.

I'm really watching because the next big one. Because I think once you get to three, you're going to get to 10 real quick.

And so I do think something to keep your eye on, I think it's going to happen.

Thanks. Those are our questions for today.

Guys, I just want to finish up and saying, I certainly hope everybody heard my enthusiasm. It is heartfelt and thoughtful.

We're seeing great things in this space. We couldn't be more excited about the opportunity set.

We're working our tails off over here. And look forward to next quarter's call.

Hopefully we'll have more exciting news and stay long.