Galaxy Digital Holdings, a cryptocurrency merchant bank owned by former Goldman Sachs macro trader Mike Novogratz, has revealed that it lost $41 million in the third quarter of 2018 in an official filing. According to a Bloomberg report on November 29, 2018, the firm’s total realized and unrealized losses totaled to a whopping $136 million for the first nine months of the year.
Goldman Sachs of Crypto
Novogratz founded the firm only a few years ago, funding the project entirely out of his personal crypto reserves. Since then, Galaxy Digital has been proclaimed as the ‘Goldman Sachs of Crypto’, a nod towards Novogratz’s famed role as a partner at the Wall Street investment firm.
In its report, Galaxy Digital said that poor pricing data, lack of trading volume and a weak business sense were all factors to blame for the company’s misfortune. They wrote, “While we continue to improve and strengthen our trading business, lack of overall trading volume in cryptocurrencies has been a headwind.” However, the firm has still not proposed a remedy to its customers and shareholders. This is likely why Galaxy Digital’s shares have dropped by around 10 percent over the past 24 hours.
Making matters worse is that the firm’s report only includes financial figures until the third quarter of 2018, specifically September 30. Given that Bitcoin, and the rest of the cryptocurrency market, has lost over 30 percent of its valuation in the past week alone, it is rather unlikely that Galaxy Digital Holdings will be able to make an emphatic comeback before the year is over.
However, while the company has not churned out a great return this year, it is important to recall that the meteoric rise of crypto prices benefited the company greatly as well.
For Novogratz, however, the past year’s dismal returns are already in the rearview mirror. Speaking with The Financial Times, he expressed his belief that prices will improve in the coming months, especially once financial institutions begin investing in cryptocurrencies directly. “You’ll see that flip next year. That’s when prices start moving again,” said Novogratz. Currently, most institutions participate in an indirect capacity, by investing in crypto-based hedge funds or other financial products such as Bitcoin Futures.
Novogratz has developed a sizable reputation for his predictions of the crypto market. In 2017, for instance, he publicly claimed that Bitcoin could ‘easily’ reach $40,000 by the end of the next year. A guest on CNBC’s Fast Money segment, he added, “Ethereum, which I think just touched $500 or is getting close, could be triple where it is as well.” However, the prices of bitcoin and Ethereum hover around $4200 and $118 respectively, a mere fraction of Novogratz’s original prediction.
On October 2018, however, Novogratz decided to take a more cautious stand with his predictions and stated that Bitcoin would not top or exceed $9.000 before the end of 2018. He went on to justify the sudden price drops by claiming that people are selling ‘just to fund the burn rate of the industry.’