Q2 2021 Galaxy Digital Holdings Ltd Earnings Call
Good morning, and welcome to Galaxy Digital's second quarter 2021 earnings call. Today's call is being recorded at this time all participants are in a listen only mode. Following the formal remarks, we'll conduct a question and answer session webcast participants can submit a question.
Nine directly through the webcast.
Instructions will be provided as Q&A begin at this time I would like to turn the conference over to Gouge. The Investor Relations team. Please go ahead you may begin.
Good morning, and welcome to Galaxy. Thank you know second quarter shareholder update call 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.
Weeding those identified in our filings with the Canadian Securities regulatory authorities on SEDAR and available on our web site or in future filings, we make with other securities regulators.
Looking statements speak only as of today and will not be updated.
In addition, none of the information on this call constitute the recommendation solicitation or offer by Galaxy digital oriented affiliate to buy yourself securities, including Galaxy Digital security.
With that I'll now turn it over to Mike Novogratz, founder CEO and chairman of Galaxy did show.
Good morning, everyone.
I've got a script, but I decided it.
It would be appropriate and had to go off script, a little bit this morning to start off.
Firstly I don't think it's right not to recognize that the tragedy that's happened over the last few days in Afghanistan.
And as much as I.
I worry about the young girls they worry about the young guys I worry about the future of the Afghani public I could go on for hours on that I wanted to talk a little bit about their well cause I wouldn't bet guidance. The dollars that today tomorrow sometime in the next week banking accounts will be frozen wells would be complicated I play that's not the truth, but I'm almost certain.
It will be which goes to part of our mission right part of the mission of the crypto currency community part of Bitcoins mission is to give the world a ledger where.
It can be stored safely.
The governments can't come and take your money.
I kept the plate it away and so.
It's horrible disease. These.
Actually it's a bit in the last few days, it's kind of doubled my.
My passion for Us building this.
The new ecosystem.
So I'll stop there on that but let me give you a little bit of macro context of what has happened since last I spoke to you right. We had a spectacularly good first quarter.
Crypto prices, we're going to the moon lots.
Lots of money pouring into the system. They cleaned up to 60000 of theory about the 4000.
And then we had a really significant correction with a correction for some real reasons right prices. They probably got ahead of themselves but.
Most importantly, China decided they didn't want to be part of the crypto community. They did not want to be part of a decentralized system that cares about freedom and privacy are they wanted a centralized system, where they can control things and.
From Bitcoin mining bitcoin trading to the crypto in general having one of the biggest economies in the world pull out.
Certainly was significant we also had the bite at administrations.
Finally, starting to kind of get engaged and this regulatory drift from the us scared people and some crypto prices went down significantly I think when he fell over 50% title out 41% on the quarter.
Some people thought about crypto winter right I always thought asbestos is crypto sniffles.
Because what we saw was more talented people coming into the space, we saw private equity venture growth equity pouring into this space and most importantly, I think we saw at the very end and why crypto prices are back up.
Right we're back.
47000 in Bitcoin Tonight, our last night with Solana and Luna put in all time highs as level one solutions right.
The business is exploding.
You know we saw just last weekend.
With.
The U S Congress trying to slip in or Treasury trying to slip in crypto regulation through an infrastructure bill the power of the crypto community within three days, the broader crypto community mobilized and reward and Washington D C.
The whole Congress heard for the first time that there are 60.70 million American voters that really care passionately about.
This ecosystem about providing a new infrastructure, that's more fair and more transparent.
And so I think it was an unbelievable wake up call. It has left me more bullish than I have been.
Right crypto prices are higher.
With a really horrific piece of legislation being passed through higher because people know that is going to have to get changed and so I'm more bullish than I've been.
Listen we lost money last quarter.
We lost about 10% little more than 10% of our equity and that's what they're going to be down 41%.
That doesn't bother me, we're already we already have more than made up with it this quarter.
Our business is hitting on all cylinders.
I'm going to go through some metrics of why that didn't bother me.
What we're seeing in our business and I'm going to pass over to Christian Alex and Damian you kind of fill you in more some more details.
So on the year, we remain significantly profitable net comprehensive income of 684 million in the first half in 2021 second quarter results were primarily impacted by elevated volatility and declining crypto asset prices.
Notably bitcoin, which declined 41% point to point.
These headwinds have stated since the end of June.
And it's been offset by strong tailwind adoption across the whole ecosystem.
Important to remember that when we look at the business. The long term arc of adoption of digital assets and crypto matters far more than the businesses we are building.
Far more to the businesses that we were building and quarterly price movements in balance sheet market.
We view the adoption Battle is hard won stickier and more financially impactful over time than short term price moves.
Yeah.
Alright, counterparty trading volumes grew 90% quarter over quarter in Q2, we continue to see strong demand across our trading and lending businesses and it's worth noting we've kept our disciplined underwriting approach unchanged.
Galaxy digital asset management AUM increased over 12% sequentially in Q2, and surpassed $1.6 billion in July even with crypto price headwinds.
He has been very busy launching new funds like our venture fund to funds since we spoke last night.
All our business lines continue to focus on scaling we didn't need that their addressable markets and directing our profit to the firm and to incrementally attractive opportunities in the flywheel from our investing book continues to be a source sourcing network for monetization across our entire platform.
Beyond our financial and operational performance I want to hit on a few key updates around our strategy. We continue to grow the head count rapidly as we look to meet growing demands on our businesses. We grew head count roughly 45% since the end of the first quarter and now have over 220 employees globally to put that in perspective year to date, we've nearly doubled our staff and assuming.
Go close by the end of the year will be over 400, well over 400 full time employees.
So thrilled to announce that we were bringing on Jennifer Lee as Chief people Officer. This September Jennifer joined Galaxy from Blackrock, where she most recently served as managing director and global HR business partner for technology, and Chief operating Officer.
Jennifer brings over 20 years in people management benefits and strategy experience and joined the company to lead talent management and human resources globally.
We remain on track to close and integrate the acquisition of pick up.
Galaxy Petco teams are working closely together on how to effectively combine from day, one with focus on delivering a one stop shop experience, we expect to get from this acquisition, Chris will provide additional detail on the integration planning in his comments today.
We have formally kicked off a more concerted expansion effort in it.
E EMEA.
We're pleased to announce that we've hired Tim Grant as head of Europe as part of that effort Tim joins us from the Swiss exchange six group, where he was CEO of their digital asset exchange SPX and he brings 20 years of experience across crypto Fintech and capital markets.
During our annual meeting in late June shareholders voted to Echo ties are wider employee base to ensure the full galaxy team is aligned with our long term goals.
As we previously announced prior to closing and subject to regulatory approvals, we plan to re domicile and list in the U S.
Now I'd like to shift my comments to what I'm seeing in the space and what we believe is meaningful for investors to understand on a macro level there.
The adoption of crypto currency remains healthy even after the periods of elevated volatility various concerns raised and actions taken by regulators and the overall market cap or all crypto currencies stands at over two trillion with bitcoin, representing nearly 900 billion the.
The crypto market cap is only modestly below where it was when we last updated you on results in mid May.
The number of individual crypto users is now well over $200 million and grew by 100 million and just the last four months that is a staggering number and while the market cap of crypto currencies continue to be a valuable adoption metric I can now confidently say, we're seeing multiple different types of investment and adoption trends year to date VC investment.
In crypto and blockchain companies stands at $9 billion with nearly $6 billion invested in Q2 alone.
By comparison 2020 average closer to 1 billion of investment per quarter.
What's particularly interesting because we are now seeing investments growing in later stage companies, where it's just a few quarters ago with the majority of DC dollars. We're focused on early stage and technological improvements continue across the sector, notably the bitcoin tap with software upgrades and a theory and successful London hard for it.
Following the listing of Coinbase in April we've seen several other crypto focused companies plan to less successfully left or shipboard and listening to the U S.
The acceptance of crypto companies in the U S capital markets is a recognition that the value of these products and solutions can bring to institutions and individuals and the role of these companies can play in driving adoption to the space.
Following the two acquisition announcements we made in May we have seen several other players in the ecosystem make acquisitions or strategic partnerships with companies outside the space that are looking for a while yet.
This validates our view that the market will demand consolidation so our clients get more offer it in one place which is why the accusations of Big go vision Hill, and any others youre going to make forward will follow that roadmap.
We continue to see traditional institutions and broader corporates looking at crypto to their offerings and Amazon is reportedly hiring for expertise in crypto and blockchain I saw Walmart today announced the same thing J P. Morgan.
It was a notable skeptic from the senior level is now offering as clients access to crypto funds. The latest modality asset survey showed that 71% of institutions expect to add crypto exposure.
Adoption has been widespread and mania, driven but rather it's been thoughtful and targeted towards specific use cases as blackboard sure just a week ago of $102 billion of assets announced stable coins alone up from 21 billion at the start of the year to put this in perspective, that's more than investors about it you municipal bond funds year to date.
We continue to believe in the power and the future of the broad theory of network end to end up to use case through both our balance sheet investments in.
And that's been through Galaxy interactive strategy, we've deployed over $50 million in 2014 end up tech related companies some of the ones that I'm. Most excited about our candy digital mythical art blocks.
All of these will end up having far far higher valuations than they're marked at now.
Adoption has not been limited to institutions as governments are starting to adopt cryptocurrencies importantly, El Salvador became the first country to adopt bitcoin as legal tender driven by the fact that over 70% of people in the country lacked access to traditional financial services now.
Now it's people have a quick inexpensive and secure way to send money across borders without relying on remittance firms typically used for such transactions.
The concerns people institutions regulators have about crypto have come to the forefront there've been many headlines and extensive discussions around the environmental impact of bitcoin that debate has led to developments like the creation of the Bitcoin mining Council as a founding member of the Council Galaxy is focused on education around the subject and I'm promoting energy consumption and best practices for bitcoin mining.
Both Damien and Chris will share additional details about our efforts in sustainability and ESG in their comments.
Leverage and risk management in the space have been breaking points of concern and debate as we disclosed during the peak of the volatility of late May Galaxy's trading desk remain operational with any break without any breaks in service while many other crypto destiny changes saw significant suspensions and our lending desk experience zero default or force customer liquidations, you continues to run a disciplined.
Lending business, there's good and bad risk, taking and leveraged every market. While crypto was no different we believe some others do and taking long term approach to financing customers in the ecosystem.
We continue to be net encouraged by the tenor of regulatory and legislative developments, particularly in the U S. We fully expect that the addition of leaders like Gary Gensler and incorporation of crypto products with an incumbent financial institutions to lead to demand for robust monitoring reporting and disclosure of crypto platforms. These demands can present near term friction points, but we believe.
It is necessary step that operators in the ecosystem needs to take.
Need to take to enable widespread adoption of digital assets.
Yeah.
Galaxy is committed to working with regulators and industry organizations to help drive understanding of ecosystem and implement and the implementation of standard best practices at our other platforms I believe galaxy is well positioned to take advantage of these positive.
Positively shifting conditions for the rest of the year, we were early in investing to build the trading business and are developing a track record in asset management and others, who are ready to be all.
On this space, we anticipate the needs of institutional clients and the crypto space and add to our offerings. Accordingly, we're focused on only investing in the space, but on building a business that is diverse sources of earnings and direct ties to a growing slice in the addressable market.
And with that I'd like to turn the call over to our co president and head of global markets Damian Vanderbilt.
Good morning, Thank you Mike.
I want to start by echoing.
A warm welcome our two new Executive Committee employees that were very excited to have joined the firm Tim Grant based in London heading up there in the U S.
And also generally who will join us in September.
Two spectacular people and we look forward to having him on the team and helping us drive the business forward.
In my comments today I'd like to share some things we're seeing in terms of our current and prospective client bases provide an update on key growth areas for the firm.
And elaborate on some key strategic updates as well as to walk you through the performance of our asset management and advisory businesses, which both have had a really phenomenal quarter.
First to share some themes I'm personally hearing from our client base.
Make the following key points.
As we expected would happen large mutual funds have started participating in the sector largely sofa and derivatives products. We expect this tend to trend to continue our engagement pipeline of our institutional sales force is extremely encouraging.
Second institutional clients are very encouraged by the recent focus by the Senate on the sector.
And anticipate more guidance from the SEC to be forthcoming, enabling them to allocate more capital into the sector.
Thirdly worth noting is the demand for our research product from institutions is insatiable.
We've tripled the size of our research team led by Alex phone to enable us to research the fast growing a new subsectors within crypto and blockchain the new technologies that are emerging and further help institutions navigate how to allocate capital into these exciting opportunities in our sector.
Now turning to two key areas with galaxies current strategic focus. The first is our aim to meet all the needs of a sophisticated and global client base through a more considered expansion into Europe and APAC.
As Mike shared we've hard crypto Fintech and capital markets veteran Tim ground as head of Europe.
In this role Tim will be responsible for growing galaxies presence in Europe. Both in terms of overall operations there for us and in support of each business segments expansion into the region.
Europe is an important region for us at Galaxy already and also for Victor.
Tim saw underscores our plans to invest aggressively in growth and expand to meet the increasingly global investor demands for crypto and blockchain technology offerings.
This significant crypto Fintech and management experience within the institutional capital markets and enterprise blockchain businesses will be integral to our plans abroad.
The second really important key area of focus I want to highlight one is our ESG program.
As we are committed to conducting business based on our strong sustainability framework that prioritizes responsible ESG practices.
We are working to integrate ESG by managing and improving our ecological footprint.
Fostering a safe and diverse work environment, and ensuring strong corporate governance for our shareholders.
Our commitment to ESG permeates at all levels of the phone.
Starting with our CEO and founder.
As other executives and I have established an ESG steering committee that reports directly to our board of directors without first ESG readout held just last week at our board meeting.
We've also hired a sustainability specialist to be dedicated full time to this program and our efforts.
We look forward to sharing more results from our ESG program with you in the coming months, including clear diversity targets and environmental commitments, the latter of which Chris will discuss when he walks you through updates on our mining activities.
Now turning to our business units I'll provide an update for our asset management and investment banking segments and my partner Kris will provide updates for trading mining and our principal investment portfolio.
Beginning with our asset management business, we continue to see really strong demand for both passive and active exposure to crypto currencies, even as prices for the underlying crypto currencies were under pressure during the second quarter.
Very clearly several large institutions viewed the price weaknesses referenced in the second quarter as an opportunity to allocate.
Even with the price asset headwinds, we saw significant net inflows into our funds assets under management increased by 12% from March 31 to June 30, reaching one 4 billion.
While AUM did in the second quarter below where it initially peaked in April we.
We just announced that as of the end of July we are back up over $1.6 billion AUM.
And as of late last week, we jumped up to 1.9 billion another milestone for our growing business.
Net client inflows in the quarter exceeded $650 million confirming that the investment case for crypto currencies in a fund structure remains compelling.
This is really important as it illustrates new clutch and capital coming into the galaxy platform without the impact of crypto currency pressures.
We are reaching or the 600 investors with the majority of investors joining the galaxy platform in 2021.
Since the IPO launch on Morgan Stanley's platform, we've generated over $60 million and inflows from well over 300 clients demonstrating the significant demand investors have access to crypto currencies and.
And we have at least two other large banking partner platforms that we'll be launching in the second half of 2021.
Without partners see a global asset management, we continue to have the largest theory I'm ETF in Canada, and the second largest bitcoin ETF.
Just last week, we launched the fourth index Bloomberg Galaxy family of indices, which tracks the default checks and is designed to measure the performance of the largest defy protocols by market cap.
You'll learn more about this initiative in coming weeks.
We also acquired Vision Hill group, a premier investment consultant and fund of funds asset manager in the digital assets.
That provides sophisticated investors with access to institutional caliber investment products data benchmarks and analytics for more informed decision making.
We're delighted to have Scott Army, the founder of that business now integrated into the Galaxy family.
In helping us make inroads as we move further into asset management actively.
The transaction further expands our growing product suite and enables institutional clients to access an even broader array of data and intelligence to streamline research and informed investment decisions.
The acquisition is already paying dividends.
We announced in July a successful close of a venture fund of funds.
Subscribed round.
The fund is the first venture focused multi manager fund of funds vehicle from Galaxy digital.
And it's focused specifically on providing institutional investors access to pre vetted manages investing across the blockchain and crypto economy.
With the addition of eventual focused product G. V. H now has both hedge fund and venture focused multi manager products and the ability to invest across both growing categories.
As institutional investors increasingly seek trusted digital asset partners. We are thrilled to welcome some excellent new investors to this fund as well.
<unk>, our partners at Franklin Templeton, and Zeke capital Advisors.
Yeah.
Turning to our actively managed venture funds. The Galaxy Interactive fund is invested the full committed inaugural fund and has already begun investing out of its second fund, putting the interactive strategy at roughly $500 million in total AUM.
Very clearly the demand for investments in the intersection of blockchain technology and interactive content is not drawing up.
And we congratulate salmon, Richard and the full Galaxy interactive team to those big milestones.
Okay.
Moving now to our investment banking business led by Michael Ash. The team continues to convert at substantial industry coverage that we've been mentioning the last few quarters into active mandates.
Judy I D is currently working on seven large deals and it's active pipeline includes many more potential deals.
The team was also instrumental in advising us on both the big end.
And vision no acquisitions.
Of our seven active mandates the engagements are primarily for capital rising given the record breaking amount of fundraising activity occurring throughout the sector.
But it's worth noting as well that during the second quarter. The team won its first blush side M&A engagement.
And we expect to share more as that transaction closes.
Additionally, we acted as a co placement agent to fall Peak acquisition Corporation in connection with their announced business combination without portfolio company bullish.
Excitingly, we are continuously getting inbounds from top tier companies and crypto unicorns, although we are seeing lower than expected sell side M&A activity across our desk as companies see more upside from capital raises at premium valuations today.
Then the upside from outright sales.
Michael Ash has been hiring to assist with the growing demand and the historic levels of transactional and fundraising activity, we are seeing in our industry.
The team has more than doubled since the beginning of the year and we're actively recruiting for a senior banker outside of the U S to expand our global coverage.
Overall, we remain confident we will continue to see strong growth in both our asset management and advisory businesses and in the infrastructure, both Steve and Michael are building to support that expansion.
I'll now hand, the call to my partner, Chris Ferrara, who will walk you through some investment trends we're focused on.
More details for you are trading and mining businesses and an update on the exciting acquisition progress.
Thanks Damian.
Our trading business had a solid quarter, even with underlying crypto currency prices largely declining during the second quarter.
During one of the worst trading days of the downturn when the cumulative crypto market cap declined 22% in under 24 hours, we were proud to share with the street that our desks trading volumes in excess of six X. The typical daily volumes, we have seen year to date, and we experienced no operational or execution related disruptions, while numerous other exchanges and OTC desk experienced significant outages.
And customer delays.
Moreover, our counterparty warrant portfolio experienced zero default and in fact, we saw no missed margin calls nor do we have to force liquidate any counterparty positions. We are incredibly proud of the book of partnership business. We've built in our lending franchise, we remain focused on continuing to grow this business, while maintaining institutional risk discipline as we do so.
I'll speak to the resiliency of the institutional grade business. We are building it hopefully signals to our clients and counterparties that they can rely on us for liquidity and execution regardless of market conditions.
And there were numerous other examples in the quarter the confidence our clients and partners have in our business, including some partnership news that we were especially proud of with Goldman Sachs.
In June we were thrilled to share we are serving as Goldman Sachs as liquidity provider for its bitcoin futures block trades on CME.
As Goldman expand its crypto currency offer.
Goldman chose galaxy for this important responsibility because our trading platform is positioned to offer clients access to deep liquidity on a principle basis through our network of centralized exchanges and OTC counterparties.
Now turning to our business performance in the quarter.
No party trading volumes were up over 90% quarter over quarter in Q2, and nearly 560% versus the prior year quarter as.
As we've discussed our lending desk continues to be a source of strength and then we've added multiple sophisticated clients in the past few months.
In the second quarter, while total notional value of our counterparty loan book did shrink approximately 15% from our record previous quarter due to crypto asset price reductions and Paydowns are gross counterparty loan originations grew over 130% sequentially to approximately $1.6 billion U S for the quarter.
Moreover, our Fiat denominated loan exposure remains robust around 30% up from almost zero at the beginning of the year, which provides us stability against notional price movements driven by crypto price volatility.
And just to give you line of sight into activity quarter to date growth in our loan book resumed during July of this year, increasing backup to approximately $450 million in language with March 31.
Thrilled to share that our inception to date counterparty loan originations have now exceeded $2.7 billion as of last week $2.5 billion of which have occurred year to date in 2021.
I was wondering our training business, our non client facing electronic market, making in quantitative strategies team. The Bluefire capital group led by Andrew Harrison Wenbo had a record quarter as they grew their market presence to trade over 170 billion of notional volumes in Q2, 70% sequential quarterly increase and grew their profit.
Attribute significantly.
In terms of overall client growth, we on boarded over 60, new clients to our trading platform in the quarter and increased the total number of tokens, we provide liquidity to over 100.
We believe the scale and scope will continue to allow us to offer our clients unparalleled access to liquidity and bespoke hedging strategies for nearly all tradable assets.
Moving to our principal investments business, we've continued to invest in the most compelling opportunities across the Destocking blockchain ecosystem, holding now 84 investments across 68 portfolio companies.
In the second quarter alone, our teammates 14 investments, including new portfolio companies like ramp tokamak, and Elia, who we believe can be category defining.
<unk> is a leading on ramping product that allows developers to embed the Fiat in crypto connectivity process directly into their app and is heavily used today by successful and growing platforms, including exiting affinity and so rare both NFC based game platforms. The Galaxy ventures team was the lead investor in ramp series C financing round this quarter.
Hey, Leo is a new blockchain that Leverages Europe mileage proves to allow developers to create applications that have natively inbuilt privacy features.
The company is led by Howard Roupe, a world leading researcher in the field and another example of cutting into centralized Tech development. The Galaxy is focused on supporting.
In another example, a validation for our investment strategy. We were pleased to see our portfolio company bullish global announced their intention to go public in partnership with Tom Farley, Dave Banana in the FRP deposition Corp's back we recorded a $2 million gain from dividends. We received in advance of that listing which we anticipate could be later this calendar year.
This activity is indicative of the fundraising trends within the sector, which continues to provide the company with flexibility to realize gains opportunistically.
Also in the second quarter and Excitingly, we agreed to launch a joint venture with a renowned venture firm focused on pre feed and seed stage development investing details of which will be announced in the coming weeks.
We are incredibly proud of the venture team's dedication to the sector and galaxies mission within the business to source dual source diligence execute on and help grow the sector's, most cutting edge technologies and entrepreneurs.
Now turning to mining where the team continues to build momentum in both mining and mining finance offerings as we shared last quarter. The team closed its first two money finance deals for two separate North American miners.
And proprietary mining through strategic relationships in our knowledge of the space, we've been able to secure a steady supply of hardware and continue to expect to achieve mining capacity of nearly 2000 <unk> per second monthly deliveries through the end of 2022.
It was almost 2% of the total bitcoin network cash rate as it stands today.
And of course, we continue to mine declining at a significant discount to fair market value, even as bitcoin prices have remained lower than during the first quarter.
Turning to our client facing business our mining team continues to secure collaborative mining deals with players such as honey and Argo, including a $20 million credit facility, we extended two argo.
We are excited to continue providing crypto currency back loans and unique mifi offerings to miners across the globe.
We've also been incredibly active in our industry and framing the ESG narrative.
And the development of such for Bitcoin mining with our team publishing proprietary research on the Bitcoin networks energy consumption and in our overall commitment to our ESG strategy that Damian shared earlier.
With Amanda leading the effort for US we became a founding member of the Bitcoin mining Council a group of industry leaders participating in a voluntary an open forum to promote transparency share best practices and educate the public on the benefits of bitcoin and bitcoin mining.
We also announced we currently are utilizing electricity with an over 69% sustainable telematics and shared our three year target to achieve an over 80% sustainable power mix.
We look forward to sharing more about our ESG journey in future updates.
Lastly, before I hand, the call over to Alex I want to provide an update on the <unk> acquisition as we approach an anticipated closing towards the end of this year.
Subject to regulatory approvals our teams are well on track to achieving close and are progressing nicely together on tactical and strategic integration planning led by our COO Eric Brown.
I'd also like to provide some quick operational highlights from the big AUM business over the last quarter and remind you that some of the strategic and platform related benefits that particular acquisition will bring.
We believe that the combined client base is growing to support our long term growth through cross selling opportunities alone, but the benefits don't stop there.
<unk> has added significantly to their client base since our announced acquisition and now accounts for nearly 550 clients.
Combined with our over 600 trading Counterparties plus our clients our clients across other business lines. This represents a significant opportunity to cross sell galaxy offerings to <unk> clients and of equal importance to sell <unk> products into galaxies existing client base on a dollar for dollar on a dollar basis Vico did experienced modest AUC decline in Q.
Two as a result of crypto currency price declines. However, we continue to be pleased by because consistent growth on a constant currency basis I E. Victor custody more point today for clients than at the end of Q1.2021.
They used to he was approximately 27 billion at quarter's end across over 400 coins and tokens supporting 150 crypto exchanges.
Moreover, the pik on transaction enhances our both our product innovation and development capabilities.
After this deal closes we'll have a staff that is more balanced between tech and finance expertise is about 50% of <unk> is composed of R&D engineering product.
Personnel.
And <unk> is continue to hire as well, adding over 70 more employees in key functions like product engineering and tech support putting the victim technical team and nearly 100 full time employees.
After closing our clients will have the option to custody, where they transact and pick those clients will have access to the best in class Prime trading asset management and advisory services that Galaxy. We continue to think this combined solution will be the premier one stop shop for access to digital assets.
With that I'll turn the call over to Alex to walk everyone through specifics of our financial performance.
Thank you Chris Good morning, we've covered a lot of ground already I will keep my part III Gal.
Galaxy reported 176 million loss for the quarter.
Our equity capital was $1.5 billion at the end of this quarter without debt, representing a highly conservative balance sheet.
And to take advantage of abundant opportunities in this market.
The quarterly loss represented an 11% decrease to our equity capital.
This compared favorably to a 41% decline in the price of bitcoin and 34% decline in the overall digital asset prices during the quarter.
While galaxy carries along digital assets portfolio, we did better than the overall market because of our ever suffocation.
Active hedging investments and operating businesses.
To elaborate digital assets.
Realized and unrealized gains and digital assets, we had a $657 million declined for the quarter.
But excluding other people's money from outside investors and index funds that we consolidate this decreases to $484 million decrease.
Decline however, there was a law.
Lot of interplay between the digital assets and derivatives on the P&L gains.
Gains on derivatives were $117 million for this quarter.
Derivative gains were from hedging our physicians and other activities as an example, new fire our market neutral trading business trade spot versus futures generally where long stock insured derivatives as a result in the second quarter with declining.
The prices, we had gained some derivatives versus digital assets, where we record our spot positions.
Investments investments are great part of our story, we gained $214 million from investments in this quarter.
We recorded assessments at cost or at a significant discount to market value menu.
Many of our investments are made at early stages and it's low valuations.
There is another piece to the investment story located in digital patents investments in new token protocols. Once the token issued a recorded this digital assets.
You've spoken for made available for trading over time.
Similar to domestic.
Record restricted tokens and our balance sheet at meaningful discounts as tokens become unrestricted and are sold were recognized gains in digital assets.
This is a brief view into white galaxy outperformed the digital markets.
On the cost side.
In the second quarter, we disclosed pending acquisition of fiscal.
As a result, we were able to come out of the blackout period required in Canada since the end of the year.
Granted equity awards to our employees you see an increase for that in equity based compensation line on the P&L.
Also decreased our bonus accrual in the quarter correlated so the negative results in the business.
As Mike highlighted we are still highly profitable for the year. These gains of $684 million for the first half of the year correspondingly.
Correspondingly, we left the sizable bonus accrual on our books.
Balance sheet as mentioned before equity was $1.5 billion at the end of this quarter cash increased to $410 million at the end of the quarter the $300 million increase in cash position was driven by realized gains from investments and from unlocked new points in digital asset.
Derivatives gains and the start of our prime brokerage business. Please notice a new line item on the liability side of the balance sheet for payable to prime brokerage customers.
Now I would like to give corporate use change in auditors.
As part of moving our public listing to the U S and growing into a much larger company. We retained KPMG is our auditor starting with the third quarter of this year.
We would like to welcome Keith PMT to Galaxy and very much look forward to working together.
We would also like to thank Davidson, our Canadian auditors for the exceptional service they provided and continue to provide the galaxy.
We enjoyed working together and greatly appreciate their local expertise and Davidson talented team many banks with that I will turn it back to the moderator for questions.
At this time, we'll be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.
You may start to move to a question from the queue.
For participants using speaker equipment or may be necessary for you to pick up your handset before pressing the star team.
While we poll for question.
Our first question comes from the line of Mark Palmer with <unk>. You May proceed with your question.
Yes, good morning, and thank you for taking my question.
Hum.
First of all.
Could you talk a little bit more about the opportunity in EMEA free them up.
The potential impact of that opportunity and how we should think about the timing.
During which it will be ramped up.
Okay.
David you want to take that.
Absolutely.
So I think the the way to think about that much.
Thanks for the question is every one of our business units.
Is going to need to have an expanded footprint in.
In EMEA that will largely replicate what we've got set up here in the United States. So we will have an increased presence in or.
GTT, our galaxy digital trading business there.
That will have both trading and sales personnel.
We will have a significant presence in asset management distribution.
There are also some very interesting.
Asset management organizations in Europe.
And we're a good partner you know about Sci partnership in Canada, and we will be exploring.
Similar things that present opportunities to us there and in Asia.
If you think about our <unk>.
Best for banking business.
We need to have originating bankers and execution folks on the ground in Europe.
And then more specifically I'll, let Chris comment on the <unk>.
Venture capital shot we already do have pretty high connectivity, there, but the possibility to have.
So the on the ground.
Investment personnel and then Amanda in the mining team again already scouring Europe that may will have.
Individuals on the ground by by the first quarter next year. So now that Tim has any shade, it's actually his first day today.
Gonna go full steam ahead to put those positions in place and so you should expect them to be.
Feet under the desk, but.
The middle of the fourth quarter, I think is a reasonable expectation.
And also in full swing when we start to 2022.
Thank you.
Oh sure. Please yes, no no guidance.
Just a quick add on some of the investing side in particular his name.
He alluded to we actually.
Source today and execute globally. It is a global industry and in some ways boundary less.
And so we have good presence there already you've actually made a handful of investments.
The national companies in the EMEA region. We also have invested in some partners who have feet on the ground and give us a sort of direct expertise and access in certain regions. There, we will expand our personnel footprint as well, particularly as the regulatory landscape shifts. So that we are clear on we.
And where the opportunities are going to be when they happen in different jurisdictions globally.
But so that's how we think about on the investing side.
Thank you and just one follow up.
There's been some discussion.
Where <unk> could fit into galaxies mix.
You could put a finer point on exactly what that could look like.
Does that involve the access to.
<unk> protocols with the associated yield or other.
Other ways in which that would be manifested. Thank you.
Chris you want to take that.
Sure.
Yes.
We are spending significant time in and around <unk>.
<unk> for a while now.
Our balance sheet exposure and investing portfolio already.
On the trading side as well as the longer term seating and backing us.
The investment portfolio have had direct exposure for quite some time now.
And we don't see that declining or decelerating anytime soon.
On the product offering side, we are spending and spending a lot of time, particularly with the bigger team.
And with external partners.
Talking about offerings, taking which we think is going to be an integral part of our custodial product offering on a go forward basis, particularly as larger and larger networks.
Their networks launch that required proof mistaken stake in order to interact with the network and so I would expect that youll see our product line yet.
Have that added to it, particularly with the combination with Victoza.
Then.
From there we've been spending a lot of time as well with regulators in particular.
Walking through different processes policies and procedures on how we can and should interact with defined networks in anticipation of.
Developing basically access windows and products for our clients to then access those networks in a compliant fashion through galaxy with Galaxy Sal.
So that's sort of I mean, you know how we invest how we think about the operational side of the business. How we think about the product side of the business and even operationally I would say, we'd actually test internally across the entire firm for every business line to investigate.
How different parts of the business Couldnt move unchanged, we think operationally and from a cost structure perspective, we intend to not just talk the talk but we also intend to walk the walk as an organization and so that will take some time to develop but everyone. Here at the company is focused on how can we.
Decrease friction how can we move our business is unchanged and that is going to be an ongoing development issue for us.
For a while to come.
It's Mike here, let me just add one thing and that's and in some ways Getty.
Getting access to the best founders.
You've got to have something that and so our venture team is out there constantly meeting with the guys building the new protocols do you want to be a place where we can invest in your protocol. We can have the big go team build a wallet.
And custody, we can have our trading group.
Market, making it and so all of a sudden it really spans our whole flywheel, but it provides a real service to the new protocols to get them.
Up and running.
Talking to our clients needing.
Spokesperson and so we think we're gonna have a great. We already do have what we're going to increase a great offering.
What we think will be the best protocols that kind of remain finance and that should spin through the whole system.
So I couldn't be more bullish about almost any space I go back and forth between NFC defy.
Thanks very much.
Our next question comes from the line of Mike Grasso with Compass point you May proceed with your question.
Good morning, and thanks for taking my questions.
I guess the first one is on a few partnerships that you announced this quarter wanted to kind of get some insight into what led to those I mean, they're pretty significant names in the traditional finance space, you know with CME and Goldman but maybe.
Provide some color on how galaxies positioned and what kind of led to those wins and maybe the pipeline for those types of wins going forward.
Okay.
Mike you want me to hit on that.
Why don't you why don't you.
Sure so.
The partnership model for Us.
As an incredibly important one.
As the as the SEC that develops.
Institutionally, there was going to be a big role for.
A blue chip firm like Galaxy to play.
To really be a hub and spoke model to large institutions that can currently handle coin transactions and show the major banks, one of which I think you're referencing the Morgan Stanley transaction.
And there are many others.
We are in a position where their client base both in their ultra high net worth channels.
And also the institutional client base.
Seeking to have those organizations provide products to allow allocations or exposures and the only way that the organization can do that currently is by working with a partner who can handle the back end and so in the Morgan. Stanley example, we really provide the backend fund infrastructure for that.
<unk> to be able to go and allow there.
High net worth customers to make an allocation into bitcoin or cerium in the way that they are used to doing off of our fund platform.
We believe that will remain the case and the need for our services to help with that.
For a significant period of time.
The same is true in the institutional space, where there's a large structured product appetite.
And this also actually demand from <unk>.
Financial institution should can't handle coins to be able to have exposure through derivatives.
On the swap and is.
To be able to participate in the ecosystem and back to back institutional client demand. So galaxy will sit in the middle as one of the.
Non conflicted market, making organizations to this group I, specifically used the word non conflicted because we don't have our own exchange, we don't ever in venue.
And so we're not conflicted with how much liquidity, we are trying to put into our exchange.
We're a firm that goes and seeks the best liquidity from the network of exchanges that were connected to around the world.
So you're going to see more of that.
And in my comments there'll be another two bank platform deals announced in the second half.
And you'll see us continuing to explore partnerships in the in the listed space.
Great. That's helpful helpful color I guess.
On the on the structured space similar question I guess with what you've I guess, Mike what you mentioned before about as far as financial products are concerned <unk> been a fairly strong advocate for a bitcoin ETF approved.
By the end of the year has any of the recent commentary from the administration or no gansevoort, specifically altered your viewpoints on on the timeline for that eventual approval and then I guess part B of that question is you know that the infrastructure Bill.
It got passed or is poised to get past.
Hum.
Broker any.
Any call outs or anything we should be looking for I know, it's not going to be implemented until 'twenty three as it's currently written but any impact on the business as you see it in its current form yeah listen I, I think treasuries already kind of walking back.
The infrastructure Bill was a way that treasury was trying to sneak into the ability to regulate without actually going into the profit process and they got called out.
And I think Congress was embarrassed by the and taken off guard quite frankly by the.
The violent reaction I would almost call it violence of the broader crypto community and I think there is a understanding that everyone is always thought we should have fair regulation that people should pay their taxes.
That that we're going to get to a place where it will.
Good and fair.
And I think that's like Crypto has gone up post that bill.
You know people people realize they can't screw around with scripted community because there are a lot of voters.
Listen gensler wants to regulate crypto because he's an ambitious guidance smart and he understands that.
He doesn't have.
The authority to in lots of ways right and so there's already a little bit of a battle between the CF D C and the SEC and we'll see that play out.
I think when it comes to the ETF.
He has made it clear in the last two times, which is surprising to me that he favours.
Favors of futures based ETF.
I think that's a mistake, though listen give ya.
No.
Every single person in the ETF game.
The game is going to try to figure out what the SEC will allow them and have a product that that that fits that need.
I think our Kashi ETF would be a better product. It doesn't mean it features he kept with a bad product, which as you know where.
These are monthly futures, so theres a monthly futures roll every time.
I don't think it's the best way to set this up but that's what it looks like.
<unk>.
Target are signaling that that's an easier approval for him is it fourth quarter or is it first quarter next year I don't know I wish I did but it's certainly come in.
Great I appreciate the color. Thank you.
Our next question comes from the line of Jamie Friedman with Susquehanna. You May proceed with your question.
Okay.
Hi.
Good results here and thanks for the presentation.
I just wanted to ask.
In your prepared remarks, Mike you were <unk>.
Commenting that there are enormous number of new entrants in this space.
And.
I guess a question is that I think Damian you addressed that to some extent in your prior answer but.
How do you see that as impacting the competitive positioning of the company as are the new entrants are good or bad thing for Galaxy and why.
Yeah, Let me, let me take that listen we as an industry are still.
Young very young and so what makes an industry is lots of people in the tent and so we're still in the position of trying to bring people into the tent into the tender understanding with crypto is under those into the kind of understanding that this is more than just bitcoin its building infrastructure to build the future.
Financial services.
And so capital into the space as a net good for galaxy it increases our portfolio value immensely.
But it also increases our chance to trade chance, a chance to advise chance to be great asset managers.
Our challenge is recruiting.
The best and brightest radar assets go up and down the elevator every day. It's why we just spent so much time breaking into chief people officer.
As human capital business, and there's a lot of competition for human capital and so you know we don't see the competitors as competitors do you see them as collaborators in some ways because we're still so early but we wouldn't be one step ahead of everybody.
Okay, and then just maybe a follow up to that.
With.
Your observation that bitcoin was down 41%, but your business.
It was only down 10% is that simply the diversification of the business that you referred to.
Yeah as I said, it's our.
Actual again.
Operating business are making are starting to make money, which is great.
It's our other investment portfolio doing well and its our.
Management of art.
Core.
Quaint position being better than just neutral and so you add the three of them together and you can make up the difference of what it would be if we just had the whole portfolio directly.
And so over time I would expect our operating businesses.
Generate more and more of the AR.
The revenue on a more steady basis, and our investing businesses to still be imported but it could be less important.
Again, we're really early.
Three year old company.
We're really early in the building of the infrastructure and so we bought did go because they are an infrastructure play they're going to help us with you know.
Growing the custody business growing wallets building on Shane all of the things that are very scalable and long tail.
And so.
You'll see us transition of how our earnings volatility as over time, it just doesn't happen overnight.
Last year, the 100 malls.
Alright, Thank you guys I'll drop back into queue.
Okay.
Our next question comes from the line of Owen Lau with Oppenheimer. You May proceed with your question.
Good morning, Thank you for taking my questions could.
Could you please give us more color on principle investments I think you're getting faster and Wham til can make you also earned $2 million and different things from Polish could.
Could you please talk about the monetization opportunity there I mean, if a company.
One of your portfolio company goes public schools back do you should we get.
But then all you have to wait until after they go public I just wanted to get a better understanding of the dynamics there. Thank you.
Chris.
Yes sure.
Yes, so our investment portfolio is becoming more and more diverse.
Today, it's actually spans early stage venture equity investments that we expect theyre going to have a much longer duration.
Although in crypto, we've actually seen the duration of those investments be significantly shorter on average than what your traditional venture capital position would be.
I think if you look at our results historically.
You've actually seen a number of realizations in the portfolio, despite the portfolio being young and our company being pretty young.
So we have those early stage equity crypto venture investments.
A lot of cases, those actually turn into liquid tokens.
Got that.
Either tradable realizable or have some emission schedule that that we have the ability to actively manage and realize over over a period of time post listing so.
We have those equity investments we have total investments we actually have now some public equities that we've ended up with by virtue of having successful private investments and so that's how we end up owning coinbase shares because we have made two investments in companies that Coinbase had bought which then turned into a coinbase public debt.
Coty shares so in general.
We've seen the trends we've seen a number of crypto companies end up into Q2 be.
Acquired by a stack and get this back.
We have a number of those actually in our portfolio today.
The spectrum of our liquidity in those.
Facts and circumstances spectrum and so in some cases, we will have an immediate liquidity of some cases, where we were earlier investors. We will have a short the customary market standoff.
Which is which is pretty typical those deals maybe 180 days something like that on average.
We do have opportunities for liquidity, so I think.
The last thing we want to do is monetize and investments early when we think it has a massive growth potential which is a little bit of a problem in investing in this space, but I think we've actually demonstrated and you'll see us continue to demonstrate some.
Some prudence in terms of taking realization opportunities in small amounts when we see them and when we think fit.
Happened historically and Youll see it on a go forward basis. So we will turn the portfolio.
Easter than your average venture capital fund.
Got it that's very helpful.
And then I wanted to go back to the regulatory development and Mike you just talk about the tax reporting requirement, but what other specific regulatory clarity you would like to see to accelerate the adoption in this industry I felt like you know given that O.
SEC chair stand over the past few weeks. It seems that there is still a discrepancy between the SEC and equipped to come in at the community on whether there is enough.
Clarity do you think.
Things like Wichita Kan should be classified as securities will come out at the commodities would be good for the adoption of longer term. Thanks.
100, 100%.
Not there yet I think and I hope you didn't hear me Ron what I think was impressive about what happened in D. C..10 days ago was that there's a real recognition now that every congressman and senator has to get up the curve has to understand what crypto is what blockchain is and they are scrambling to do so and that's a great.
Because with intelligence, we're going to get better regulation. It is important for us to understand what our brokerage is at coinbase. That's a broker. Okay. We can all agree that's true but is it mining no it's not.
Defy well, that's you know you're going to hear Gary guns or try to argue it is and you're going to hear you.
First amendment.
But let's say, it's just code you can't regulate coated free speech and so there are a lot of gray areas that still need to get get decided on what I'm optimistic on it they're gonna get decided on.
The other part is what's the security and what's not a security Gary has been pretty clear to some degree but haven't the SEC hasn't.
Really laid out guidelines right they they like to regulate by lawsuit as opposed to setting rules.
And that's frustrating and so we're going to.
See that evolve over time.
<unk>.
Clear that becomes the better it is for the whole industry.
Nobody wants to drive off innovation I mean, if you think about it.
The claim I'm, sorry, Galaxy plus big go it's going to be 400, 450 employees by the end of year, if not more all making good salaries all new jobs in the last few years like you'd be you'd be crazy to be a congressman are centered in say I'll, let let's drive that offshore right and so I think the wake up call is how do we get the right regulation.
How do you leave enough room for innovation, even if it's not a perfect set.
Set of rules.
Air to the side of leading innovation in young industries go and so.
Listen we need is it.
As an industry to do a much better job in Galaxy is gonna be part of it educating the.
People in D C, but it drives me crazy that the progressive politicians.
Don't see crypto as a progressive.
Europe, it's wildly progressive it cuts out the rent takers in lots of ways. We are a banking system, where you pay on average $4.50 is an ATM when theres been I think $12 billion of overdraft fees last year, mostly overdraft fees have been people who have less money.
And yet the progressive sort of like trying to protect the banks and and and are nervous about crypto and so a lot of this is just education and again I think 10 days ago with some big wake up call for everybody our side and their side to really increase the education.
Thank you Mike.
Our next question comes from the line of.
Rich Repetto with Piper Sandler you May proceed with your question.
Yeah, Good morning, Michael and team and I guess the first question is around defy T. In theory, Mike you talked about how optimistic you are about the opportunities there we've seen.
Look at Coinbase as results.
Last quarter trading them, if there was a bigger percentage than it's ever been or at least spent over the last few quarters and I guess the question is our institution their institutional trading came up too. So our institutions do you see them onto this theory and more focused on.
The things that theorem can gen.
Generate versus just bitcoin.
What's your feeling about that yeah listen I think.
Most people go through the same journey encrypted and they start with bitcoin and they say Wow. This is pretty cool right. This is a first step of peer to peer.
Digital store value like a digital goal.
That's easy to get your hands around.
And it serves a huge.
Purpose in People's portfolios, if you're worried about the debasement of Fiat currency.
The Queen is a perfect solution.
That's only one part of the Crypto Revolution right in some ways the more radical part the broader part is what a theory that building can rebuild the base layer of trust for other stuff to be built on top of four.
<unk> protocols right ft's for transfer of value.
On the internet to be built on and.
It's really hard to understand what the total the total addressable market of that is right. I mean, it's I said I said pretty recently.
The theory is the currency of culture, who the heck knows what the Tam is.
And that's what the excitement around the theory is right now so yeah, all the hedge funds and all the big institutions are starting to look at it theory I'm just as easily as they looked at bitcoin and say Hey, you.
You can kind of deal with bitcoins Tam in the short run is what percentage of gold is.
Where.
If gold to 10 trillion dollar asset Pik.
900 billion were 9% of golf right now at one point I think that Clinton will become 100% of go it's not going to happen in a year and that can happen in two years, but it's going to happen over time.
And so what's the theory.
Target, how do you try to create value of our out of network harder harder to figure out, but what I know right now as it is growing at an accelerating pace.
<unk> market is growing at a stunning pace I mean, its shocking to me how fast it's moving like the defined market the amount of talent coming in is growing at accelerating pace and so when you invest it.
Something we're the second derivative is positive.
The second driver of growth is growing like nachos, growing, but growing and accelerating pace price usually goes up.
So we're very bullish with area.
No listen there are other layer, one protocols things like Luna things like Falana.
That are booming as well because people are saying, hey, there and probably as the winter, but is it a 100% sure it's gonna be the winter polka dot and so the whole level one space right now.
It's all very exciting.
But it's because people are seeing where this is going to three years to four years Theyre, saying that NFC is arent that that it's a way we are going to.
Monetize value and creativity.
Okay got it.
Super helpful.
And then just my follow up and not to harp or to harp on the regulation.
Side of it again.
I'm not sure what you get with the futures ETF.
Versus the cash ETF and then I think I believe the courts have ruled that the cash ETF is.
<unk> is a security where ganzer has been pretty.
You know upfront that he considered bitcoin a commodity that's been established but the cash ETF at least the courts.
A route that's in his his.
Our responsibility. So I guess the question is you know do you see anything any movement from Congress or to give them that power because it.
At least do you agree that until he can regulate the crypto exchanges he is probably not going to.
Approval.
Crypto ETF.
I'm not sure that's the case listen it's complicated it's complicated stuff right. Once you put something he asked is by definition yes.
Even if the underlying thing can be ETF, not a security right a gold ETF as a security for gold is not a security.
And so how how we determine who regulates what is complicated I think.
You see the head of the CF D C kind of shot back across the bow. After Gary was trying to kind of take the whole spot himself.
That will get worked out.
Like I said, we're going to invest more and trying to help them get to the right right answers and understand the dynamics of what's happening down there.
In some ways.
You always want no regulation until you get good regulation.
Status quo is much better than.
Then bad regulation, but you'd rather have the right regulation.
Well that we're going to iterate towards that.
Great Great. Thank you that's all I have.
Our final question comes from the line of Kevin Dede with H C. Wainwright you May proceed with your question.
Hi, everyone. This is trying to take hirschmann in for Kevin D. G are still new to the story. So apologies if any of these questions are abundant.
Just kind of want some more color on how you see the competition in the space.
Do you see some more consolidation like your competitors acquiring.
More companies trying to build out their business lines, and what kind of technology.
Waiting to crypto and <unk> are you looking at specifically.
Yes.
B a ton more competition.
[noise] period every single day someone else.
<unk> announced that they are coming into the market now we see that as an opportunity set right. We want to we want to help those people get their crypto strategy setup.
So are they compete directly against us in the <unk>.
And trading business. There are a few major competitors theyre going to be hiring as fast as we are and they're gonna be going after the same business but.
You can imagine one work on old Securities World, where there was just Goldman Sachs Goldman Sachs.
It's always an old got older Gobbling at Goldman Sachs, Morgan Stanley and Merrill Lynch.
Barclays and so we.
Expect to be one of the key players in each of the businesses, where we enter.
In the venture space, there is amazing competition money pouring in.
That's why you've got to have something in each area that differentiates you.
Got great investors in the venture space, both San Langobard, Richard Kim on the interactive side, Michael Jordan, John coal on the on the more traditional defy side, we're building great teams in those spaces and but we're competing against guidance.
Our wildly smart wildly well resourced and so I think in each space, we look at.
Competition is a good thing, but certainly understand that you've got to be good to win.
Right again in five or six years my answer might be different.
But right now bringing people into this tense credentials in this space and growing it is the most important thing for our success and quite frankly, if our stock price.
Yeah, that's great color. Thank you.
Could you talk a little bit more about how you hedge if I recall correctly I think you're trying to ask was partially long spot short futures as a way to hedge.
So we have lots of trading strategies, where we have an arbitrage trading strategy, which takes advantage of the dislocations in markets.
We hedged through option, sometimes the market is.
As John has a risk of downside in volatility as cheaply Mike.
<unk> puts we hedged by selling coins that we think are not as long term sustainable or whoever.
To pass the price moves we can sell one versus another so all kinds of trading strategies to try to mitigate our downside risk.
If we had a crystal ball, we would've sold lots of bitcoin at 60000 and bought lots more of 30000, but that's it.
That's a tough game and so we try our best.
To understand where markets are going into play the ups and downs in the markets, while the whole time, keeping our core position in our fundamental belief that all of these coins are the good ones will be significantly higher in value 12.
12 months 24 months 36 months in the future.
Great. Thank you and just a more general question do you have any expectations for that corn price at the end of this year and maybe in five years.
You know at the end of this year is like it's a good question I think we will go back at least to retest, the highest 60000 or <unk> 46600, as we speak.
And so I think there is enough momentum that it looks like we shouldn't recast the eyes.
And five years could we get to 50% on gold, which is five accident here.
250000 that seems like a reasonable target.
Right.
Just look at the adoption.
I don't see what's going to change the momentum that we have.
Okay, Yes, that's great color. Thank you really appreciate it.
Alright, thanks, guys.
Thank you for joining US today. This concludes today's conference you may disconnect your lines at this time.
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Yes.
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