- Galaxy Digital launched an investment bank in 2019 to compete for crypto deals.
- The space is now exploding, with cryptocurrency mergers and acquisitions hitting an all-time high of more than $4 billion this year.
- Galaxy is betting that its specialized outlook will help it compete alongside the well-known players on Wall Street.
Galaxy Digital was founded in 2018 with the goal of institutionalizing the free and savage crypto world.
In the next three years, the company’s asset management arm has amassed about $3.2 billion in assets under management (including nearly $2 billion in cryptocurrencies), and recently secured a partnership with $1.6 trillion money manager Invesco to launch mutual funds. Traded digital assets. Meanwhile, its trading operations saw a 280% year-over-year increase in counterparty trading volumes in the third quarter, according to its latest earnings report.
But there is one area where Galaxy — founded by former Goldman Sach partner Michael Novogratz — continues to strengthen: help brokering cryptocurrency deals, which reached record levels this year.
The company launched a crypto-focused investment bank in 2019. It advised on two of the best deals in 2021. However, the real test is yet to come, as larger and more traditional investment banks like Citi and Jefferies are also vying to advise on trades in The crypto sector is booming.
Galaxy says it is ready to take on the challenge and is drawing on its deep market experience to win a portion of what will become a multi-billion dollar business.
“There is a lot of complexity to understanding crypto and digital assets. It is, frankly, not something you can fake,” said Michael Ash, a former director at independent investment bank Oppenheimer & Co., who joined Galaxy last October, in a recent phone interview. with the insider. “We have the advantage of sitting in a working company that spends all of its time dedicated to cryptocurrency.”
Experts agree that Galaxy has a chance of success even in an established sector of finance such as investment banking. Devin Ryan, chief financial officer, said that unlike other areas of mergers and acquisitions, which are usually dominated by a few players, there is more room in an emerging field like this for a start-up bank to pull a seat at the table.
In JMP Securities.
“There is a greater opportunity here for some of the early adopters to build platforms across capital markets that can be competitive with traditional financial services firms,” Ryan told Insider.
“This is not a winner-takes-all market,” he added.
Cryptocurrency trading has exploded over the past year
As of mid-November, Dealogic has registered 59 crypto mergers and acquisitions worldwide this year, resulting in more than $14.5 billion in activity. In 2020, the volume of cryptocurrency mergers and acquisitions reached $996 million globally.
In the US alone, there were $4 billion in deals in 2021, with a year-on-year increase of nearly 600%.
“The space is growing really fast, and we’re just in the early stages of the race,” said Ryan, analyst at GMB Securities. “The
They participate in that day, and so they are building their experiences in real time.”
Galaxy’s recent dealmaking credit includes serving as Blockdaemon’s sole financial advisor on the planned acquisition of German blockchain infrastructure company Anyblock Analytics, the terms of which have not been disclosed. The deal was announced in November.
Galaxy was also the underwriting agent for cloud computing company CoreWeave that raised $50 million from Magnetar, an Illinois-based approximately $14 billion asset manager, which was also announced earlier in November.
The company was the joint underwriting agent for a $300 million private fundraising related to the merger of crypto exchange Bullish with special purpose acquisition firm Far Peak, which was announced in July. It also advised BlockFi in its $350 million Series D round last March.
The investment banking team’s previous earnings include advising crypto app Blockfolio on its $150 million sale to FTX in 2020.
In 2019, Galaxy co-managed the $45 million public offering of crypto bank Silvergate; He also served as the joint underwriting manager for the $90 million initial public offering of Canaan, a Chinese crypto mining hardware manufacturer.
Even non-crypto companies are looking to participate
There are sure to be some important crypto deals that Galaxy hasn’t been involved in. Most notably, there was a live listing of the largest number of Coinbase this spring. Goldman was a major runner for the books, and Galaxy wasn’t involved.
A person familiar with Galaxy’s investment banking operations, who declined to be identified, told Insider that the bank did not seek to be listed on Coinbase’s live listing.
Investment bank Galaxy was in the midst of a leadership transition when Coinbase tapped Goldman, with Ashe joining Galaxy just weeks before choosing where to trade as an investment bank to mandate. Ian Taylor, the former head of investment banking at Galaxy, departed in the fall of 2020 to rejoin Goldman Sachs as Head of Capital Markets in Australia and New Zealand.
And as the place continues to heat up, so does the competition.
Jefferies Financial Group advised on two high-profile crypto trades: Bullish’s mentioned above
Issuance, which received additional support from JPMorgan, Nomura and Berenberg Capital Markets; In addition to Bakkt’s SPAC partnership, which also included Citi and Solomon Partners.
But while many banks across the street view crypto advisory as a product of their tech, media, and telecommunications lines of business, crypto is Galaxy’s bread and butter. Galaxy hopes this will help hone its efforts to persuade companies outside the digital asset space to benefit from its expertise as they also seek to navigate the murky world of decentralized finance.
“We had a conversation yesterday with a very large technology and market company that does not deal with cryptocurrency today,” Ash said. “The question is: How can we help you feel comfortable? How can we help make you smart about the contiguous aspects of the crypto ecosystem that will have an impact on your business?”
‘We are really able to tap into our DNA’
The company expected to bring in several high-ranking employees, but declined to name them. The investment banking team is in a growth position, Ash said, “sourcing talent from highly reputable banking institutions.”
Some of the junior investment bankers on Ash’s team have previously trained or worked at Barclays, The Carlyle Group and Goldman Sachs.
“We have team members here, really at the associate and vice president level, who are responsible for covering some of the sub-sectors within the space,” Ash said.
And while they are being overseen by more senior bankers, he added, it’s a rare opportunity to show leadership as their peers at more established firms breathe on their disregard as cogs in the deal-making wheel.
Ultimately, Ash and his team share a common goal: to build a business based on the promise that the bank, which grew out of a broader crypto company, demands unparalleled knowledge of the field.
“We just have an incredibly divergent view of how to tell a story for a business” in the crypto space, Ash said. “We are really able to tap into our DNA.”