Q3 2020 Galaxy Digital Holdings Ltd Earnings Call

Good morning, and welcome to Galaxy Digital Conference call. Today's call is being recorded at this time of all participants are the listen only mode. Following formal remarks, the will conduct the question and answer session.

The cast participants could submit it quested online directly through the webcast at this time I would like to turn the conference over to the Investor relation team. Please go ahead.

Good morning, and welcome to the Galaxy Digital shareholder update conference call. We're joined today by of founder and CEO, Mike No regrets President, Chris Ferrara, and Chief Financial Officer Ash principle.

Before we begin please note that our remarks today may include forward looking statements actual results may differ material materially from those indicated or implied by of forward looking statements. As the result of various factors, including those identified in our filings with the Canadian Securities regulatory authorities on SEDAR.

And the 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 recommendation solicitation or offered by galaxy digital or its affiliates to buy or sell any security, including Galaxy digital securities with that I'll now turn it over to Mike now the growth.

Good morning, everyone.

Actually the pick up the phone and good morning, everyone.

You know very different tone of today than I've had on probably the last.

Eight of these calls you know we started galaxy.

Two three years ago, you know what type of this idea that we'd be the bridge between institutional investors on the crypto community and you know with hindsight, we were little early and we waited and we waited a and finally you know the range is comp.

The the world could not looking for different today than it did six months ago for our company and for the whole crypto business.

You know COVID-19ien in many ways is horrible for the world and continues to be harder for for worlds, we see of kind of exploding back everywhere in the U.S., but it was really a.

An accelerant for the crypto Kobi cryptocurrency business for big coin for block chain for everything that we do.

And so since April we've changed our attacked from having been cautious to having been the becoming very aggressive Ah I see an unbelievable opportunity for our company and for the space the quaint as trading 16300.

It's trading like that not because there is a spec of the mania going on its trading like that because institutions hedge funds high net worth all the high net worth individuals family offices are all moving into bitcoin other moving into as a store of wealth, they're moving in as an inflation hedge other moving in because of becoming institutional assets and so our thesis.

That we would be the spreads between the institutional world Encrypt. The world is finally, playing out you know what are we doing about it we've brought in Damian Vanderbilt or to be a co president he's a five year partner of Goldman Sachs. We bought it Michael Ash to help us run investment banking.

We brought in just the announced today, yet to two acquisitions, which I really look at it acquires of for talent in for technology drawbridge lending would chase in urban and Blue fire with Andrew Kerai EPS we.

We brought Amanda for fabiano win or to build the mining business I am or higher and we got to help wanted sign out there.

One of the seven Grand here in Cielo.

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 past you know 2017, we had this back of the mainly we're all worried about a this is very very different you know one pay Pal announced they were getting into the business of 320 million accounts. It sent to the shock wave across all financial institutions. The said we need to be in the.

Business and since then we've had almost every financial institution, we know either you don't reach out to our reach out to the people we know how they're going to get engaged in the space and so this is kind of the first inning for the institutionalization of crypto ER and we think we're really well prepared for it you know we've built a tremendous amount of domain expertise amongst our.

Businesses.

We know the game or you know we know how it works, we think we know where it's going and so.

I'm Gonna leave the details to Chris to kind of take you through our earnings we had a good quarter, we're having a better quarter and the fourth quarter as you can imagine, but you know crypto price is going higher and all the activity.

But one of the really be be clear that we are in growth mode or we see blue skies ahead and couldn't be more excited for the business.

Thanks, Mike Chris Yep.

Thanks, Mike.

Anyway. So the gas digital is had we had the most active six month in our history and certainly this past week has been no exception we.

Because of our $50 million pipe financing, where the great roster of institutional investors, including slate, Pat see Icore anti and the ends the funds and we all day and as we also announced this morning, we took the critical step forward with the acquisitions of of drawbridge lending amplifier capital.

I'll walk through our strategic rationale for these acquisitions momentarily, but first let.

Let me share of what we're seeing in the market. That's motivating our decision to continue to reinvest behind our leadership position space as Mike mentioned 2020 has been the turning point for crypto institutions very kind are publicly discovering an advocate for crypto not just of the new digital payment rail or as the the new decentralized supercomputer, but also as a low correlated asset within the broader investment portfolio.

The institutions now publicly include some of the largest global most of multi asset investment funds in Tech Giants Facebook pay per elsewhere, 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 institutions 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, GAAP reported a comprehensive income of 44.6 million, which adds to the prior period of profitability or leads us to 55.4 million of total comprehensive income for the year to date period and that's through September Thirtyth.

This reflects the 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 block five which successfully completed its series the financing this quarter.

For in a significant up round from our last investment after continuing to demonstrate phenomenal growth in other congrats the Zach for in the entire block five team.

Now turning to our business units in our trading business, we continue to win market share and grow our client and counterparty focus derivatives and electronic trading activities, resulting in our odisi trading desk facilitating over $1.4 billion of quarterly volume amounting to our largest quarter in our operating history Q.

Q3, EPS you see volumes represented 28% sequential quarter over quarter growth over Q2, 2020, and over 75 per cent compared to last year's Q3.

Galaxy is continued growth in market share as a result of being one of our being one of the go to train destined crypto able to address the bespoke needs of sophisticated institutions looking for a large audit of trading partner.

To that end drawbridge lending include fire capital represent important acquisitions for gas digital trading that slot easily and efficiently into our leading GDT platform by amplifying our advantage is filling 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 of Galaxy will look like in the months of the comp.

Drawbridge as an innovator in digital asset lending borrowing of structured products, while blue fires of technology, driven proprietary trading from specializing in market, making it to side of the liquidity for digital assets. Both firms are located in Chicago and led by sales in market veterans.

The primary benefits to gosh that all of these transactions for US are clear first this combination further expands tradings activities beyond just our current O T C offering 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 barring structured products as well as price.

Brokers like services, including trade execution clearing and settlement in margin based trade financing.

Second Galaxy digital intends to leverage our brand institution relationships in our publicly audited the balance sheet towards scaling drawbridge of suite of unique lending and structured product offerings. It's important to note here that we've already been in business for drawbridge for some time and we know the team very well, we made an investment into them in 2019 and have built the growing life of loan book, together, which we intend to expand.

Going forward as the result of this transaction.

Next we intend to point galaxies brought sources of liquidity toward the Lou fires best in class trading strategies the execution, while further enhancing their superior relationships with key global crypto exchanges that arise out of their 40 plus billion dollars of annual notional spot at the rate of trading volume.

We expect the fire to help us drive utilization optimization of our balance sheet as well as drive trading cost down across the entire platform, which can then in turn be passed on to our clients to provide the lowest cost execution and highly efficient financing options.

Organizationally. These deals established the strong regional hub in Chicago for Galaxy digital to expand the agency prime brokerage electronic trading services and the increased connectivity with the largest global exchange players and traditional derivatives firms as they look to move into the crypto markets with galaxy of the Blue chip partner.

Finally, drawbridge, the CEO and co founder Jason Urban will join Galaxy digital as co head of Galaxy digital trading and will work alongside fellow kind of had Pete was nevsky.

Andrew Caretrust will remain the CEO Blue fire, which will continue to operate as a wholly owned subsidiary of Galaxy.

Jason and her both better and traders with Jason having run significant businesses at both Goldman Sachs and the R.W., Andrew having built his own from where the decade, plus long successful traditional equity director of trading track record prior to turning the attention of crypto and 2018, but beyond Jason Andrew We're very excited about the addition of the entire drawbridge and Blue fire teams for the Galaxy.

The family.

These additions will increase our resources in the trading business by over 50% in 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 high end market demand for bitcoin and other major cryptocurrency is against the backdrop of excess 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 pick away at the start of value on the other.

We have built our strategy around the institutional wealth channels and the credit investors and are seeing promising initial traction as our brand marketing investor education and partner sales channels begin to amplify one another as the.

October 31, our passive index the decline funds cross the $120 million a day, you I'm and it's growing fast.

Also in the third quarter, our Galaxy interactive venture capital team, who manages the Galaxy U.S. VC 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 for follow on investments.

Turning to GAAP digital investment banking, which has continued to build at the pipeline of mandates entered the lower first class execution, the clients, including representing block folio and its $150 million sales FCX <unk>.

As we communicated in the 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 run out of new head of investment banking, Michael Ash, who was previously built multiple industry focus businesses before at both the city and Oppenheimer.

We're also excited to launch scouts of digital marketing, 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, the galaxy Amanda Fabiano.

And it was at fidelity investments for the past six years focused on mining the clean products and the Queen education.

No I personally had the pleasure of working with both Michael and the matter 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 share galaxy and 2021.

Finally in terms of our from balance sheet and our principal investing activities. Our team is continuing to pursue differentiated new opportunities. The team investing 7.5 million of total new capital in six new and for follow on investments in the third quarter, including in two of the most prominent the fire decentralize financed investment funds and the sector terrify capital and robot Ben.

Of course.

With that I'll turn it over to ask the walk everyone through the specifics of our financial performance for the third quarter cash.

Thanks, Greg.

I will provide some additional details regarding other financial results for the quarter.

Our comprehensive income for the free month ended September 30 of total $44.6 billion. We the comprehensive income for the nine months amounting to $55.4 million.

The kind of quarterly gain was primarily a result of realized and unrealized gains on each of the assets and I mean best assets, partially offset by operating expenses.

The fourth quarter 2020 figure includes $8.3 million of equity based compensation expense, which is a non cash charge and the has no net effect on equity.

This brings our total equity for net book value of $445.6 million out of September sales or.

Or to the other five on net book value per share Canadian or $1.50 for all of net book value per share your debt.

As of September 30 of a number of companies. They told me Cosby your assets and stock options outstanding by 17.2 million and 21.4 million respectively.

The actually get compensated for the airport how to value of $8.1 million remaining give the amortized over the life.

Operating expenses for the for the month. The ended September Thirtyth, what's the $17 million inclusive of equity based compensation of $3.3 billion, although the second piece of it.

Operating expenses for Lula, well, the three and nine months ended September 30 of 2020, that's compared to the free of nine months ended September 30 of 2019, due primarily to the lower equity based compensation and the the look on vacation expense of 20 Cody.

Regarding our balance sheet $7.5 million of new engine for the line investments during the third quarter brought the investment balance the $200.7 million.

As of September Thirtyth, we have 45 individual investment positions, excluding other cryptocurrency and free ask your holdings with no single investment position, representing more than 6.6% of our net debt that is.

And the guts to the Trowbridge lending and the fly a capital acquisitions. The consideration includes 3.8 million of ordinary share subject to customary purchase price adjustments and the company intends to glass of 5 million contingent options. The second employee to any of the company as incentive all we can share awards.

That piece the report that we had $244 million of liquidity as of course, the red our liquidity include other working capital and the digital assets, which is the bendeka they get for with commitment and projected free cash expenses.

I've kind of any qualities and Paul and will allow us to continue to operate the business the ticket pockets of marketable change it.

The that I'm not trying to call back the they'll break it. So we can address questions from our equity analysts and investors.

Ill break the any questions from other equity analysts.

Yes. Thank you we have a question from P. back the show with Stifel.

The N.P.

You bet you May proceed.

Right.

Got it because the are you.

Oh excellent.

Thanks for taking my questions nice to have a.

Uh huh positive backdrop, and crypto space with the your conference call.

Just wanted to jump in on the acquisitions looks like you are paying share as an option for the acquisition of the there's no cash portion. So I assume you guys still have you.

The that's for 50 million dollar pipe financing how your disposal one of the plans for spending how do you kind of carved out up into the different parts of your strategy of.

The what can we look forward to the.

Sure, let me take that Mike.

Yeah, I think that from yeah. So the the you you're accurate in terms of the in terms of the purchase consideration for the acquisition and and therefore, the the pipe financing was all primary capital that that's being added to the balance sheet the that that capital primarily.

Well it will go towards towards financing a different businesses inside of the train business as well as helping to launch and start up and add financing to the Bonnie business as well and so when you think about us expanding our structured product offering.

Extending our financing of customer trades and trading margin base financing the things of that all as well as or adding capital to the existing trading strategies of Bluefire you should think about that as the primary use of proceeds for the for the pipe.

Okay and on on on the the acquisitions <unk> current <unk>.

What can we think of in terms of the financial impact I mean can you share any any of the the income and profitability metrics that these kinds of and pulling in of the growth rates of and how you might accelerate that going forward any kind of the impact any kind of color on potential financial impact should be helpful.

[noise] yeah sure. So <unk> the the the well we'll talk we'll speak to and report and report sort of.

The their performance is going forward in time right now, we're focused on adding them and integrate them into our existing business quite quickly and so the you know some of the some of the specifics that that we disclose we could talk to is on the on the drawbridge side, the they bring over $150 million of third part.

Of the assets that are being managed in various products from forms of the platform on day, one ER and in fact, they've been they've been a a part of the driver of our our existing book as well over the last year as we partner with them on on on adding different financing.

Assets onto our balance sheet and on the Blue Fireside, you know Bluefire is one of the largest global market makers oneexchange, the non run rate basis trade over $40 billion notional annually of crypto.

And and so you know you should we should you should think about that going forward as being a day and engines going to generate consistent a consistent high alpha return equity sort of based on the amount of capital we put behind the business and so yeah, we're where we expect.

At both of these to be at it additive to the business and accretive from an M&A perspective over the over the 18 month period on the high end of on the long end and so, but we're going to sort of integrate them and see how the how it kind of fits into the business going forward.

Hey, Deepak, it's Mike here and the one thing I would I would tell you is that in some ways and the way I look at these things. These are off of hires of really really talented guys at a time when the business is starting to explode. In so you look at Andrews engine that he's built a plugging our capital of the in played into some of the systems that we already have.

And thank you know listen it it might be 18 months it might be 12 months of maybe six months based on the amount of volume that's pumping through these markets all of the side of it I don't think it's going to go away or the same thing with the the derivative business or.

That Jason urban is bringing over in the lending business demand is going the way up I mean, we're having a hard time hiring people fast enough to.

To to build out listen there's competition as well that our competitors are doing the same thing and so what's exciting from my perspective is.

We were in a very nascent industry ER and it still is but now you're pretty certain that they're going to be you know multiple players that are building out real teams and you know this is going to be a real business.

And so in lots of ways or our business plan has been de risked. The you know the big coin ecosystem has been de risked.

And so that volatility in in kind of life comes down right. You know, there's no existential threat all of the sudden or the it either on the bad debt is going to take too long of the regulators are going to screw yet and so now it's really a race to get the right people and the right seats or into early start kind of looking 612 18.

The 24 months ahead of where the ball is going.

And so I, you know I am I'm wary of per share or of past performance predicting future performance. In this case, because I think future performance could be like a lot of their the path for me.

Thanks, Mike That's really helpful. You know you mentioned existential threat I mean, how do you look of the deep white space right now in terms of exponential growth I know you put some money to clarify.

Yeah the title.

Well like when I said that in house the.

What we were doing and a lot of that in house and I think a couple.

The next earnings call I think are well, we'll roll out more of our D. Five plan.

And how we see the deep deep by the funny word really what the five really is is we're taking a block chain of the financial services industry and it is by far the biggest threat to the banking system. It's just early range the sandbox still and that's the growing sandbox right. It's gone from 500 billion locked up to 12 billion. The 500 million the 12 billion.

But we're still in and I called the sandbox stage.

And so we've got some of our smartest guys in the from a working at making investments in that space and restructuring and how we participate in the space.

And I think you know 2021 of certainly in 2022, it's going to be a big it's gonna be of you drive driver of things around here Oh, the but right now we're still in that kind of I I first any thought.

Got it so I'm curious, though if we have of kind of a boom and bust cycle.

Cycle with the if I like we saw in <unk> do you think that the big coin and mature cryptocurrency market. The insulated from that of you think we passed that stage, where everything is kind of correlated to the single I didn't think so let's I would I would split into three buckets I would talk about decline as the macro assets.

You know, it's almost the a cottage industry. These days.

That I think is reached escape velocity and you know were trading at 60000 today. It wouldnt be surprising to me if we don't take the old highs out relatively soon and you know people who work in the clean goals that it's at 60000 Declaim were only 10% of gold JP Morgan just put out of paper talking about the clean as an alternative to goal.

Of the they're seeing clients want to make the substitute and so I'm sure like 10% is a great bogey I picked that up in five years 10 years really looking back and saying the claims with more of these will add.

And so this is a multi year process of adoption of Vickland, but I've literally we are cross escape velocity.

And then when you look at everything else right. The theory of block chain right price of the theory of is going higher the will continue to go higher.

The theory of like it is most likely the block chain that everything else gets built on so we're de fiber reside for stable claims will reside.

Ah Centerbanc issue digital currencies are going to be a thing every single center bank is talking about them trying to figure out, including the U.S., including Europe, including Brazil, and so we're going to see of rebuilding of the financial architecture of the the U.S. and of the world over the next in the 10 years 10 to 15 years 15 years of.

And the block chain is gonna be a monster part of the knees.

These you know the the theory of ecosystem and and these projects being built on top of that and so I kind of look at a theory of payments as kind of chapter too, but it's really correlated and all of these new new projects, which you know one of the thinking about defies the peer to peer or derivatives peer to peer in interest rates.

Moving period of your futures trading period for equity trading and you know the listen there's a regulatory hurdle. The go through the that's not been worked out and so the regulators at the kind of catch up to the technology of the technology is got to fit itself into a regulatory framework.

I'm confident that will happen over the next few years.

And so I I slipped my mind, you know like half of our business is kind of focused on this.

Opportunity that here today, which is the claim really becoming a global the global assets or you know one day, if you're lucky for the global reserve currency of but really becoming a global assets are and the second is the giant venture debt, which is wildly exciting we're going to see a real rebuild.

The of the financial services business or you know in a few years you know defined fintech. The I'll just call. It Fintech you know and so I think in some ways. There are two businesses that are very interconnected, but you can think of the losses to two real drivers. So.

That's the way I think about it and I think listen there's there's going to be great opportunities on both sides.

Got it got it and so when I turn the focus back on the year operating business I know you've got you know good success on your principal book I.

Good day.

Mm one of your thoughts then on on reaching breakeven on the operating side and when you kind of get actually philosophy in terms of profitable.

Profitable growth, there or any changes now that the markets a bit hotter.

Yeah listen I I will be disappointed if we don't do that next year and then so right the.

The banking business should be close it eat or might even make of this year trading we put a big investment in and it hasn't gotten there yet or you know it has certainly if you include our proprietary trading but I think by next year. We certainly should have you know cross that threshold asset management of live.

The the one that will take a little longer partly because you know it's the game of.

Ah yes.

You know the big numbers of your for putting an investment you need scale, there and so we're getting married or asset management businesses. Finally, picking up and we took the track of going for the wealth channels or they are finally moving in.

And so I am optimistic we've got lots of partnerships or for that we are working on some of that have been announced some that are coming and so.

I think you know give us some patients on the asset management side, but you put the three together I would certainly hope that we're operating.

Out of profit next year on an operating basis.

Oh excellent well you know I I don't want to dominate the call I don't have the other analysts are in the wing. So I will jump back in the queue and then if there's no.

No more questions. Later, then then I'll jump back at the next year.

Thanks, the type of them. Thanks.

The next day bar.

We also have a question from the line of Robert Young at Canaccord Genuity. Please proceed.

Hi, good morning.

I'm thinking about galaxy as a bit of a leading indicator for the other investors and you're investing activities recently said you'd you done of number of recent investments can you talk about the.

The what you're seeing out there in valuations and competition for the deals that you're going after.

The investments you're making.

Yeah, Yeah. So most of the investments we've [noise].

[noise] most of the investments we've been making are in the we'll call of the device space and there you know the the game there is to find the best teams of the best ideas and and to kind of fight hard to to get any good valuation.

You know we made an investment in a company called one inch we made an investment in the company called Luna in Korea that and you know what's interesting about the.

The way told the work right Big claims of the store of value assets, it's valuable because of his valuable and the theory of has this you.

You know potential of the oil or the the gasoline of Oh, the net powers this whole ecosystem, but the cool thing about a lot of the D. Five project as they trade more like equities, they're almost the dividends and so you can look at as this business grows there is going to be some dividend, which is decided by the community or any of your kind of day, you know discounted cash flow.

And I think you're going to see more and more people are traditional investors attracted once once these companies be couple of scale or to the space because it's a little easier to intuitively figure out and so we're making small investments ER or in and around the space. You know these are early venture investments that you know if.

You're lucky there six to one eighth 110, the ones 50 the ones.

And you know what ends up happening is as they sure. Hopefully then you become the participant in their part of the ecosystem. So staking claims on their on their system or other lending money into their system or buying insurance from their system and so I think it really becomes a symbiotic the ecosystem in time.

But that's that's kind of where our that investment dollars of gone a other than that we we continue to have the you know.

The large cryptocurrency position that the you know I used the traded pretty actively I I really believe that we're in a structural shift here that you know the the crypto guys call of Hodaly hold on for your life, just not trading as much of <unk> watching the appreciation and so I think we'll probably.

Hold on to our big point position, if not at times or is it just because we're seeing so much the man for.

Right and that that demand a bigger how is the how does the investment banking pipeline looking now versus say three or six months ago interest, especially in context with the strong new hires of made I think you said you could get profitable in that business. This year does that imply the theres that really good pipelines.

Yeah, Yeah, So oh, sorry, <unk>, Oh, Hey, Chris you got it yeah, yeah, Yeah, and I'm going to say the you know, we anticipated, having having or a little bit of the of the king and in our pipeline because we transitioned the you know we brought Mike on.

That was that was our anticipation for the <unk>. The reality is is actually the the pipeline has stayed constant and that's true and has grown because the the existing team. That's there has built up a lot of domain expertise and it it's at the right at the right time when there is oh, there is a significant amount.

End of <unk>.

Of both consolidation in the 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 the focus of the business today right. Now is it is on M&A that that's that's where the biggest opportunity is.

Ah, Yes, we hope to and we expect to see the capital markets.

Out of the business start to expand but its still young in early in the in the capital markets day is for for Crypto and so you know the way that we said this in the past the three again the there were two crypto ipos IPO. So starkly we were a part of both of them. We may see some more coming next year, but its young and outside.

The business. So so think about it as a as the corporate advisory of M&A, M&A environment and and the expertise. We have developed a there has has started position us quite well with that.

That's great and maybe one last question for me ill pass the line and the the acquisitions you made it I think suggested there maybe as much acquire as they are to get train volume any sense of the the share that you have now in this market as its I think you said inflecting are growing.

No cost line. Thanks.

Yep Yep, yeah. So on the on the now with the addition of of of of Bluefire. We expect we will we will be we will start off and then expand and be a top five or top five market maker and participant.

Almost all the the biggest global or current exchanges.

ER and our share of their should extend she spent quite dramatically as we as we put more of our balance sheet behind Andrew and the blue for our team's efforts sort of out of the gates.

The ROTC business today, you know I I, there's there's not a ton of industry data I missed our volumes as we said sort of you know grew almost 30% quarter over quarter a in a in a time when the industry industry volume is actually were flat to slightly down so our our share of the of the OTI.

C market is is we think is clearly growing but really what we see what we see is all white space in terms of in terms of of capturing white space that the isn't really share taking today, which going forward is going to be on onboarding clients and providing a different kind of trade financing in March the based financing and prime brokerage services and so the.

It's largely been.

Been held just in custody today, and we think it's going to expand up the stack the on custody pretty quickly and that's kind of right, where our sweet spot is and for that that's why the the addition of these teams helps us to to to be in a position to meet that demand and do that at at efficient and low cost, which is the which is the the key that we think we need to be at offer the clients to really.

Yeah sort of make it the best place to try it.

Right very exciting thanks for the color gentlemen.

We now have I saw the question from the back.

The phone. Please proceed.

Thanks, guys. Thanks for taking my follow ups growth.

Chris just on the on the last comment there on the Odisi volumes for the volumes are going up your market share is presumably going up for your grabbing more of that white space. What are you seeing in terms of trends in the spreads the commissions and can you give us a sense of.

You know target, our OE versus versus what you achieved the years old trucks.

Yeah, Yeah. So part of the target are we side because of the bids are still scaling right. So you know it's it's certainly on on a on a on a true on a trade level were profitable on a of business level, we're scaling into profitability, which Mike pointed out it is clear the the.

The LTC business.

Sort of margin profitability wise has been pretty consistent now for the last in the last 18 months. It's it's a it's a it's a thin business in the largest most liquid from the currency bitcoin and it gets it gets sticker as as the market gets less the there's less liquidity of assets are more sit there, but it really really like.

The the LTC business for US is isn't important bedrock in the business. It's something that that we think will always be demanded or and is something that where we can out of one off basis provide a big piece of pride Big block trade liquidity for our biggest the best clients that that's that's where the business was hit.

Darkly, where where we 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 of single deal or access to a variety of suite of products that include a much more cash.

The the fishing trading through financing as well as different structured products of different esoteric sort of around around the spot and we're starting to see a real pickup in demand and interest level in in all of those and all those things the taught us to really really hone our our product innovation of that in in a way that we can ross scalable for the market. So.

So it's it's it's a it's a growing scaling the business for us today, but but really the go forward.

Our expectation is that the the amount of volume horizontally and vertically across different products and the and the margin capture for US is going to expand all of the same time right as the platform growth. That's the that's the trajectory that we have slated for the business.

Okay I got two more if I may I, just want to see can you offer a bit more clarity on the mining started the you know you had some investments in miners in the past and then you kind of shifted the narrative to to be more of an advisory focused on on the mining industry in terms of M&A and financing.

You bought somebody new on board.

What's the go forward strategy here for money.

Yeah, Yeah. So the the our new sort of our constituted reconstituted mining groups specifically is meant to be a in the industry industry vertical that that that stretches than horizontally across everything we are doing at the farm income.

So the that group.

That group will will will themselves or we will actually do some proprietary mining ourselves because because you know this all came out of the advisory groups of work in in laying out all the players in the space, where all where all the cash rate was what the levelized cost of production could be it should be.

And sort of really thinking through the economics of the quite mining we think it's a it's actually a great a great time to be in the day clay mining space right now and so so you'll you'll you'll actually see that group procure hardware or for ourselves as.

As a as a as a as a base investment into the business and then and then from there. The the idea would be its going to be for us to sort of per per use that access to the equipment and the relationships with the equipment riders to then provide different kind of leasing and financing of opportunities too.

The people, who want to want to get into the mining business themselves and.

And so you know we've internally to of the name of my Fi money for the S.. So that'll be a core component of that group, but the group's responsibility is also still to to to provide to maintain coverage of of the biggest and most interesting mining participants across the space.

And make sure that where we can be helpful. Whether its with our trading desk in terms of coined liquidation or hedging strategies, whether it's in our financing teams are more bespoke you know like historically, our how day style financing that we did or in the Investor banking group. If there is the capital raising opportunity or an acquisition.

The an opportunity or a project financing opportunity to make sure that those relationships get slotted into the the experts within our different businesses. So that we're capitalizing on the whole space. So that's the that's the that's the the task that net imagine team not in front of them and we're we're super excited about it because because we think it's it's a a the the spaces rice for.

For new investments a in a in an organized and professional way.

And the economics of their.

Interesting I mean, it's pretty capital intensive to have you got a number that you want to invest in terms of capital equipment.

[laughter].

[laughter].

We're debating that internally [laughter] or amended the team have a number that's for sure or a cash so.

So.

Yeah, the <unk> it'll depend what we're definitely going to allocate some debt some bounce of two apart some for part of the the pipe proceeds is going to go is going to go towards towards that first first investment into the business. I mean, it's it's not going to be you know if have you all of the pipe and I think it'll be the it'll be a a small amount of it and then and then from there we'll see how the market demand.

Develops or for different financing products and that will determine the sort of how much how much capital we ultimately put into the into the business right. My expectation on the it'll be it'll be a it'll be a very interesting place to be investing capital for the next for the next year at least for sure.

Got it and my last question is for from like are you is on the M&A side like do you think the.

Well you know what there's been anticipation of of consolidation in the industry.

You know for for a lot of the players that you know started up well growth through the 2017 both period.

And have we broken the logjam, there or is that going to start to accelerate you guys are requiring the we expect more consolidation of the and then obviously the mix again, there's going to be more consolidation I think you're going to see consolidation within the crypto community for up to the crypto companies, you're going to see the tech companies looking to acquire domain expertise.

Yes, I mean, it's not lost on it shouldn't be lost on you that you know pay Pal ER, which is a giant tech company ended up hiring the crypto company to help them implement their their crypto strategy right. Because there is just domain expertise that they they need the either build or buy in its going to be quicker for a lot of these tech companies, who are all going to rush into the space.

The the one thing that is clear to me is the.

Every single the company that wants to be in the financial services market is going to need block chain in crypto expertise and so you know building up the domain expertise is good for the whole lot you're going to see that happen at the M&A space.

Okay, great. Thanks, again for taking all my questions I appreciate all of your time today.

Yep.

Thank you we will now turn to online questions.

Yes. Thanks, we are getting a lot of good questions.

The turn to the first one that.

First question, we have the bitcoin is on the tenant is now above a 16000, a weird of <unk>, where does it go from here.

Yeah like I said this in my remarks I think.

For the first obvious stop is 20000 of the old highs or.

My kids are lapping of like tweeted that I would get attached to the moon. Unlike shoulder and so maybe that haven't me for a before January of next year or you don't listen when markets are breaking out of moving like they are you don't know exactly when they take their first part of the 20000. The is definitely the net a checkpoint I consider the I do think.

The credit 60000 of 10% of goal and that's the that's a good net stopping point.

Is that 18 months, probably it's 18 months 12 months 18 months, but when people used to make those predictions I would say that's kind of a lack of prediction looking the hanging on and now I think these are really rational for next is 10% of gold doesn't seem that far of of stretch and I think once you get there you'll probably be readjusting it off over over the near.

You know 235, 10 years, and so I really believe we've we've crossed this adoption.

Hurdle and now it's just a question of more and more adoption as as this kind of goes viral right. It's the network effect.

For the most importantly, the lots in some ways. It's just you know.

How much crypto is being bought on Paypal every day are you know right now it looks like it's 10 to $12 million to $13 million a day. The that accelerates you know and you see it see see being bought on the square out you're going to see it bought in funds like ours.

And and other funds he's getting put away. There's only 21 million that point, there will only be ever 21 million decline and as the scarce assets and so when the demand exceeds supply because supplies roughly of getting some soaked up so quickly price is going higher.

All right next question.

What the makeup of the volatility and valuation in the fight is this a repeat of the ice Seo boom in 2017.

Yeah, we had what I call the campus of the teapot or.

The idea is so powerful the idea of defy is so powerful the people got wildly excited about in the short period of time. There were some of you know height. There were some bad projects or add and we saw but what I would call a many of you know speculative.

Two months of down bubble and I think you you don't want to lose.

Track over the the broader trend the device in the first inning or there's some amazing projects that are going to be built into it three and four years time or were not even in call. It the thought like I said, we're going to call it intact.

So I think you've got to keep your eye there you've got to be investing there or yeah.

Certainly there will be more of kind of trading opportunities one of things get over height, or but I wouldn't let the volatility of scared the I'm certainly not letting it scare me away a interest for scared Galaxy away I think we're going to make a big commitment in that space and think it's a it's part of the future.

All right or.

The next and final question are there are a number of corporations, who indicated they will move partially from cash to big coin.

What is your expectation of how hsas.

Treasurers, we'll move to adopt the cooling.

Yeah, Mike My favorite Ted talk.

Is this one about the guide dancing on the street on the Hill the Greenhill the graph any dancing like a complete the lunatic it everyone's looking out of their price 75 people sitting on the 11 of Pitney looking at the Maniac and all the send the second Guy goes up the starts dancing with them and then a third and then a force. The next season of the whole hills dancing like Maniacs and.

You know what I always said it a movement of started by the second guy or the third Guy and we're seeing that right. Yes up you know we didnt like of sale or was this company and then square or we don't get credit we were the first company to actually a lot of the going on our balance sheet of what were crypto company. So people expected I think they're probably companies that we on the heard of that already habits.

The private companies, but I think it's going to become the trend I'm really watching for the the net big.

Big ones I think once you get the three you're going to get the 10 real quick and.

And so I do think some of the keep your eye on I think it's going to happen.

Thanks, those are all the questions for today.

I just want to finish up and saying Ah I, certainly hope everybody heard of my enthusiasm or it is it is heartfelt and thoughtful we're seeing great things in the space, we couldn't be more excited about the opportunities that we're working or working our tails off over here and.

Look for it to next quarter's call hopefully, we'll have a more exciting news and.

Stay long.

Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

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