Galaxy Digital, the crypto merchant bank, is going to raise over $250 million for a credit fund to make USD loans available to crypto firms struggling the bear market.
The year of 2018 turned up to be really hard for cryptocurrency market. With the extended downturn in crypto prices, a great number of smaller companies, as well as some bigger and more established ones such as Shapeshift and Huobi, have been forced to downsize in order to survive. This has lead to the emerging demand for crypto loans, which are considered as the only real chance for the downsizing companies to return their revenue.
According to the recent Business Insider report, Galaxy Digital, the crypto merchant bank launched by former hedge fund manager Michael Novogratz, is going to raise at least $250 million for a credit fund in order to make USD loans available to crypto firms which struggle the bear market.
According to the report, the fund will be asking for collateral in the form of cryptocurrency assets, properties, and even mining hardware. The first round of fundraising for this new credit fund is expected to close in March. In the article, Business Insider cites “people familiar with the matter” as a Galaxy representative has reportedly declined to comment on the issue.
Galaxy Digital’s founder and CEO, Michael Novogratz is not new to the business of making loans. He is a former Goldman Sachs partner who created his merchant bank in the hope it would eventually become the “Goldman Sachs of crypto.” This ambitious had begun to prove since the 1st of August, 2018, when Galaxy Digital received the final approval from Canada’s regulators and got officially listed on Toronto’s TSX Venture Exchange.
A little bit earlier, before the listing on Toronto’s TSX Venture Exchange, Novogratz bought a Canadian crypto startup called Coin Capital and then merged the company through a reverse takeover with a Canadian company called Bradmer Pharmaceuticals.
Galaxy Digital can already boast an experience of loaning money, but from its own balance sheet. Last year in July, the company invested $52.5 million in cryptocurrency-backed USD lending platform Blockfi, which resulted in its 10x growth in revenues and customer base. In October 2018, the Wall Street banking giant Goldman Sachs and Galaxy Digital Ventures together invested a total of $15 million in the Series B funding round for BitGo.
In the times of bear market, many cryptocurrency companies have faced serious problems, and Galaxy Digital is not an exception. Back in November, Novogratz told the Financial Times that 2018 had been tough for his company. Galaxy Digital reported a loss of $76.65 million in Q3 2018. Commenting to the issue, Novogratz said that it “sucks to build a business in a bear market.”
But despite the recent market downturn for mining firms, companies that make their money by providing loans to companies with crypto holdings, such as Blockfi and Salt Lending, are reportedly growing due to the demand the current economic climate generates for their services.
In a bid to keep up with this new trend and in order to prove the reported ambitions, Michael Novogratz has recently invested nearly $5 million more in his cryptocurrency venture fund, Galaxy Digital Holdings, Ltd. which trades on the Toronto Stock Exchange, raising his total stake to about 79.3 percent.
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