Q2 2024 Galaxy Digital Holdings Ltd Earnings Call

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Operator: Please stand by. Your program is about to begin.

Operator: Please stand by. Your program is about to begin. If you need assistance during your conference today, please press star zero. Good morning, and welcome to the Galaxy's second quarter 2024 earnings call. Today's call is being recorded. If you would like to ask a question, please press star 1 on your telephone keypad. To remove yourself from the queue, please press star 2. At this time, I would like to turn the conference over to Jonathan Goldowsky, Head of Investor Relations. Please go ahead, sir.

Speaker Change: Please standby your program is about to begin if you need assistance during your conference today. Please press Star zero.

Operator: If you need assistance during your conference today, please press star zero.

Speaker Change: Yeah.

Jonathan Goldowsky: Good morning, and welcome to Galaxy's second quarter 2024 earnings call. Before we begin, please note that our remarks today may include forward-looking statements. Forward-looking statements speak only as of today and will not be updated. In addition, none of the information on this call constitutes a recommendation, solicitation, or offer by Galaxy or its affiliates to buy or sell any securities, including any security issued by Galaxy. With that, I'll turn it over to Chris Ferraro, President and CIO of Galaxy. Thanks, Jonathan. And good morning, everyone.

Operator: Good morning and welcome to the Galaxy's second quarter 2024 earnings call. Today's call is being recorded.

Jonathan <unk>: Good morning, and welcome to the Galaxy second quarter 'twenty 'twenty four earnings call. Today's call is being recorded if you would like to ask a question. Please press star one on your telephone keypad to remove yourself from the queue. Please press star two at this time I would like to turn the conference over to Jonathan <unk>.

Operator: If you would like to ask a question, please press star one on your telephone keypad. To remove yourself from the queue, please press star two.

Chris Ferraro: Before I turn over to Alex and Mike, I'll first review our operating results for the second quarter of 2024, key trends within our businesses, and the momentum we have heading into the back half of the year. Let's start with global markets. As anticipated, this transition has empowered us to offer larger U.S. institutional clients the chance to participate in a well-established and regulated trading environment. Through the first half of the year, we have traded approximately $13 billion in notional OTC derivatives, which is already $5 billion more than we traded in all of 2023. Further, we have continued to onboard new clients across our trading offerings and ended the quarter with over 1,200 global markets counterparties.

Jonathan Goldowsky: At this time, I would like to turn the conference over to Jonathan Goldowsky, Head of Investor Relations. Please go ahead, sir.

Speaker Change: <unk> head of Investor Relations. Please go ahead Sir.

Jonathan Goldowsky: Good morning and welcome to Galaxy's second quarter 2024 earnings 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, including those identified in our filings with the Canadian Securities Regulatory Authority on Cedar Plus and available on our website or in future filings we make with other securities regulators.

Chris Ferraro: We've seen an uptick in on-chain opportunities, such as providing liquidity for protocols and facilitating hedging derivatives and lending for clients with locked token positions. Despite the overall crypto market being down 12% in the second quarter, our ability to increase our lending book by 5% quarter over quarter signals that we are continuing to win market share and organically scale our business. We are seeing tangible growth in the build and client adoption of Galaxy One, our unified technology platform offering institutions all the tools to trade, finance, store, and manage digital assets efficiently. This deal will add approximately $250 million of additional fair market value assets to Galaxy One.

Chris Ferraro: And finally, in conjunction with this deal, I'm also pleased to share that our digital infrastructure solutions arm will be providing staking services for these new assets as well, continuing to build on that group's quickly growing base of recurring client franchise revenue. This deal, along with a number of deals like it, both closed and in the pipeline, further showcases the strength of Galaxy's diversified platform, the differentiated institutional service offerings we're able to provide our clients, and importantly, the flywheel that we've set out to build here at Galaxy across the firm's operating system.

Jonathan Goldowsky: Forward-looking statements speak only as of today and will not be updated.

Jonathan Goldowsky: In addition, none of the information on this call constitutes a recommendation, solicitation, or offer by Galaxy or its affiliates to buy or sell any securities, including Galaxy securities.

Christopher Ferraro: With that, I'll turn it over to Chris Ferraro, President and CIO of Galaxy. Thanks, Jonathan. Good morning, everyone.

Chris Ferraro: Moving to the other segment of our Global Markets business, Investment Banking, this quarter, the team also tokenized a 1708 Stradivarius violin using GKH technology, a tangible example of our ability to monetize illiquid assets as part of our broader tokenization strategy.

Christopher Ferraro: Before I turn over to Alex and Mike, I'll first review our operating results for the second quarter of 2024, key trends within our businesses, and the momentum we have heading into the back half of the year. Let's start with global markets. Spot and derivatives trading volumes across the industry decreased in the second quarter as activity fueled by the launch of the Bitcoin ETFs in January returned to more normalized levels. As a result, in Q2, our counterparty trading revenue and volumes decreased compared to the prior quarter, largely in line with the decline seen in the broader crypto market.

Christopher Ferraro: Despite the quarter-over-quarter decrease in trading volumes and revenues, our counterparty-facing trading business has generated approximately $90 million in revenue year-to-date, an 80% increase relative to the first half of 2023, and nearly the same amount that we earned all of last year.

Christopher Ferraro: As a reminder, earlier this year, we crossed $8 billion in trailing 12-month notional OTC derivatives traded, requiring us to register as a swap dealer in the US and comply with a new set of regulatory requirements. As anticipated, this transition has empowered us to offer larger US institutional clients the chance to participate in a well-established and regulated trading environment. Through the first half of the year, we have traded approximately $13 billion in notional OTC derivatives, which is already $5 billion more than we traded in all of 2023. Further, we have continued to onboard new clients across our trading offerings and ended the quarter with over 1,200 global markets counterparties.

Christopher Ferraro: News. Notably, in recent months, we have seen increased engagement with protocols and crypto-native clients who are leveraging our full product suite to engage with the broader ecosystem. We've seen an uptick in on-chain opportunities such as providing liquidity for protocols and facilitating hedging derivatives and lending for clients with locked token positions. We continue to originate new loans to meet increased borrowing demand from both new and existing clients, with our average loan book size growing to just under $700 million. Despite the overall crypto market being down 12% in the second quarter, our ability to increase our lending book by 5% quarter-over-quarter signals that we are continuing to win market share and organically scaling our business.

Christopher Ferraro: We are seeing tangible growth in the build and client adoption of Galaxy One. Our unified technology platform offering institutions all the tools to trade, finance, store, and manage digital assets efficiently. We ended the second quarter with over 100 clients and over 1.1 billion of fair market value assets being serviced by the platform. And I'm also excited to share that we continue to facilitate client purchases of locked tokens and subsequent to quarter-end. We closed on yet another sizable syndication deal. This deal will add approximately $250 million of additional fair market value assets to Galaxy One. These assets will build on the already strong base of recurring service-free revenues on the platform.

Christopher Ferraro: And finally, in conjunction with this deal, I'm also pleased to share that our digital infrastructure solutions arm will be providing staking services for these new assets as well, continuing to build on that group's quickly growing base of recurring client franchise revenues.

Christopher Ferraro: This deal, along with a number of deals like it both closed and in the pipeline, further showcases the strength of Galaxy's diversified platform, the differentiated institutional service offerings we were able to provide our clients, and importantly, the flywheel that we set out to build here at Galaxy across the firm's operating units.

Christopher Ferraro: Moving to the other segment of our global markets business investment banking. Our team successfully closed two deals in the second quarter, serving as the exclusive financial advisor to Topusware in its sale to Polygon and to another client on its strategic financing. Additionally, in the quarter, we announced that Galaxy served as the exclusive financial advisor to Bitstamp in its pending sale to Robinhood, which is expected to close in Q1 2025. This quarter, the team also tokenized a 1708 Stradivarius violin utilizing GKH technology, a tangible example of our ability to monetize illiquid assets as part of our broader tokenization strategy.

Speaker Change: 2025.

Speaker Change: This quarter. The team also took <unk> 17 O H stradivarius violin utilizing <unk> technology, a tangible example of our ability to monetize illiquid assets as part of our broader tokens station strategy since.

Christopher Ferraro: Since the announcement, we have received numerous imbalances from both new and existing clients who have shown interest in fractionalizing and lending against high value, traditionally illiquid assets. Broadly, while capital markets continued to face headwinds, we expect to see more issuers launch capital raises, as well as additional M&A opportunities in the second half of the year and into 2025.

Speaker Change: Since the announcement, we have received numerous inbounds from both new and existing clients, who have shown interest in <unk> and lending against high value traditionally illiquid assets.

Chris Ferraro: Broadly, while capital markets continue to face headwinds, we expect to see more issuers launch capital raises as well as additional M&A opportunities in the second half of the year and into 2025. Turning to our asset management business, we ended the second quarter with $4.6 billion of AUM.

Speaker Change: Broadly while capital markets continued to face headwinds, we expect to see more issuers launch capital raises as well as additional M&A opportunities in the second half of the year and into 2025.

Christopher Ferraro: Turning to our asset management business, we ended the second quarter with 4.6 billion of AUM. While this represents a 42 percent decrease quarter over quarter, the decrease was anticipated and overwhelmingly driven by our continued successful execution in monetizing the FTX estate's digital assets holdings for creditors. As of quarter end, the value of the assets tied to the various FTX mandates remaining that we are managing was $520 million US. While the AUM and fees associated with the mandates will continue to decrease over the coming months, we have successfully returned over $8 billion to creditors, making Galaxy the only player in the space with a proven track record in executing a complex multi-billion dollar bankruptcy mandate.

Speaker Change: Turning to our asset management business, we ended the second quarter with $4 6 billion of AUM.

Speaker Change: While this represents a 42% decrease quarter over quarter. The decrease was anticipated and overwhelmingly driven by our continued successful execution and monetizing the <unk> States digital asset holdings for creditors.

Speaker Change: As of quarter end the value of the assets tied to the various MTX mandates remaining that we are managing was $520 million U S.

Christopher Ferraro: And we're incredibly proud to have been instrumental in rectifying the aftermath of the 2022 crypto cycle, aiding creditors in reclaiming their funds and supporting the industry in rebuilding trust and credibility.

Chris Ferraro: And we're incredibly proud to have been instrumental in rectifying the aftermath of the 2022 crypto cycle, aiding creditors and reclaiming their funds, supporting the industry, and rebuilding trust and credibility. Building on our existing partnership footprint in Canada, the U.S., Brazil, and Europe, on June 26, Galaxy Asset Management announced it has joined forces with State Street Global Advisors to develop a suite of manager-directed digital asset ETFs that will offer investors exposure to companies involved in the digital asset space going beyond crypto and Bitcoin.

Christopher Ferraro: Building on our existing partnership footprint in Canada, the US, Brazil, and Europe, on June 26th, Galaxy Asset Management announced we have joined forces with State Street Global Advisors to develop a suite of manager-directed digital asset ETFs that will offer investors exposure to companies involved in the digital asset space going beyond crypto and Bitcoin. Since its inception, Galaxy has been a leader in active digital asset management. This collaboration with State Street leverages our combined expertise in creating and managing investment-grade products in ETFs globally, positioning us to make the over $2 trillion digital asset ecosystem more accessible to a broader investment community.

Chris Ferraro: Since its inception, Galaxy has been a leader in active digital asset management. Finally, on the venture side of our business, we conducted $113 million initial close for Galaxy Venture Fund One, our inaugural crypto venture fund focused on investing in early stage companies across crypto protocols, software infrastructure, and financialized applications. Given that this fund has garnered stronger than expected interest, and that opportunities to deploy capital have expanded meaningfully in recent months, we expect to continue fundraising into next year to reach if not exceed our $150 million target, aiming to build a targeted portfolio of approximately 30 exciting new digital asset, This team had an exceptional quarter, with our assets under stake reaching $2.1 billion, representing an over 340% increase quarter over quarter, a leading blockchain node operator that provides trusted secured services to decentralized protocols across the digital asset, In addition to enhancing our position as a leading technical partner to protocols and builders, this strategic acquisition expands our staking capabilities even further, increasing our Ethereum assets under stake by approximately $1 billion, which brings our total assets under stake to over $3.3 billion as of today.

Christopher Ferraro: We're aiming to go to market with three ETFs in our initial product launch, and we'll keep you updated on progress here. The team has also remained focused on the US ETF landscape and subsequent quarter-end announced the launch of the Invesco Galaxy Ethereum ETF, QE, in partnership with Invesco. This offering builds on Galaxy and Invesco's existing product suite following the launch of the Invesco Galaxy Bitcoin ETF, BTCO, earlier this year.

Christopher Ferraro: Finally, on the venture side of our business, we conducted a $113 million initial close for Galaxy Venture Fund 1, our inaugural crypto venture fund focused on investing in early-stage companies across crypto protocols, software infrastructure, and financialized applications. Given that this fund has garnered stronger-than-expected interest and that opportunities to deploy capital have expanded meaningfully in recent months, we expect to continue fundraising into next year to reach, if not exceed, our $150 million target, aiming to build a targeted portfolio of approximately 30 exciting new digital asset companies. The official launch of this fund marks an over a year-long process of moving Galaxy's core venture investing team off the balance sheet and into Galaxy Asset Management, which we believe will provide long-term, sticky management fee revenues.

Christopher Ferraro: Galaxy Asset Management's strong track record and global product reach has laid the groundwork for us to continue to attract institutional capital throughout the second half of 2024 and beyond. With nearly 2.4 billion in passive AUM, over 630 million in active AUM, and 1.5 billion in venture AUM, Galaxy is one of the largest and most trusted digital asset managers globally.

Christopher Ferraro: Turning to our digital infrastructure solutions business, let's start with blockchain infrastructure. This team had an exceptional quarter, with our assets under stake reaching 2.1 billion, representing an over 340% increase quarter over quarter. This significant growth has not only bolstered our staking operations meaningfully, but also established Galaxy as currently the largest validator globally on the Solana network.

Christopher Ferraro: We are also excited to share that in July, Galaxy announced the acquisition of Crypto Manufacturer, a leading blockchain node operator that provides trusted, secured services to decentralized protocols across the digital asset ecosystem. In addition to enhancing our position as a leading technical partner to protocols and builders, this strategic acquisition expands our staking capabilities even further, increasing our Ethereum assets under stake by approximately $1 billion, which brings our total assets under stake to over $3.3 billion as of today. By integrating CMS engineering expertise and resources, Galaxy is positioned as a more prominent player in the Ethereum ecosystem, providing enterprise-grade support and innovative solutions to every corner of the digital asset space.

Chris Ferraro: By integrating CMF's engineering expertise and resources, Galaxy is positioned as a more prominent player in the Ethereum ecosystem, providing enterprise-grade support and innovative solutions to every corner of the digital asset space. Now, turning to mining. Our mining business continues to be positioned as a leading Bitcoin miner globally, reporting revenue of $24 million for the second quarter. Our net power purchase costs and external hosting expenses were approximately $10.5 million, resulting in a 56% direct mining profit margin.

Christopher Ferraro: Now turning to mining. Our mining business continue to be positioned as a leading Bitcoin miner globally, reporting revenue of $24 million for the second quarter. Our net power purchase costs and external hosting expenses were approximately $10.5 million, resulting in a 56% direct mining profit margin. In the second quarter, we operated at 5.6 sxhs per second of combined hash rate under management, down 3% quarter over quarter, despite network difficulty declining almost 10% during the quarter. And despite the Bitcoin having event in April, which reduced block rewards by 50% for all miners, we maintained a low marginal average cost to mine of less than $22,500 per Bitcoin in the second quarter.

Christopher Ferraro: As Q3 will be the first full quarter post-having, and we expect network hash rate to increase significantly in the second half of the year, we do anticipate our marginal cost to mine will increase next quarter. We have been very discerning in when and towards one end, we direct our capital investments, with our focus on securing long lead time electrical infrastructure that is portable across mining and other computing applications. We have also opportunistically upgraded our A6 fleet when marking conditions have been attractive, which is what we did in the first quarter of 2024 when we purchased 3,000 new Bitmain S21 machines.

Chris Ferraro: We've been very discerning in when and towards when we direct our capital investments with our focus on securing long lead times, and electrical infrastructure that is portable across mining and other computing applications. We have also opportunistically upgraded our ASIC fleet when market conditions have been attractive, which is what we did in the first quarter of 2024 when we purchased 3,000 new Bitmain S21 machines. These machines are online today, and we expect to be able to scale to 6x the hash rate under management by the beginning of the fourth quarter without any further material capital expenditure.

Christopher Ferraro: These machines are online today, and we expect to be able to scale to 6xh of hash rate under management by the beginning of the fourth quarter without any further material capital expenditures.

Christopher Ferraro: Now, I want to take a step back and talk a little more detail about our flagship Helios campus located in Dickens County and West Texas. Currently, Helios has 200 megawatts of energized mining capacity. We have firm capacity approval from both ERCOT and the Wind Energy Transmission of Texas to scale up to 800 megawatts of power from the existing interconnect. Today, the majority of our site is cooled using liquid-cooled infrastructure, with our main data center representing one of the largest liquid-cooled data centers in the world. For a small portion of our site, we use newly developed and engineered evaporative cooling units, for which we now own the IP.

Chris Ferraro: Now I want to take a step back and talk a little more detail about our flagship Helios campus located in Dickens County in West Texas. We have six main power transformers installed at our existing project substation, two of which are currently energized and powering our Bitcoin mining operation.

Christopher Ferraro: And earlier this year, Galaxy built a fresh water pond with storage capacity of nearly 10 million gallons to expand our cooling capabilities in the most efficient way. We have six main power transformers installed at our existing project substation, two of which are currently energized in powering our Bitcoin mining operations. We plan to energize the next two transformers by this time next year, which will add an additional 300 megawatts to the site's current capacity, bringing our total capacity to 500 megawatts, and the final two power transformers are expected to be energized in early 2027, which will enable us to deliver the full 800 megawatts of high-voltage capacity for which we are already fully approved.

Christopher Ferraro: Helios is also strategically positioned adjacent to the Cottonwood Switching Station, one of the largest electrical switches in Texas. Several gigawatts of electricity generated by wind and solar energy are delivered through ERCOT's transmission system here, providing us with an incredible amount of reliable power right next door. Our positioning in Texas also allows us to benefit from the competitive, deregulated market structure employed by the ERCOT grid, and the relatively high degree of renewables in the region, given the feasibility of wind and solar.

Chris Ferraro: Helios is also strategically positioned adjacent to the Cottonwood Switching Station, one of the largest electrical switches in Texas. However, as we've scaled, we've also seen the opportunity set in front of us rapidly evolve. We recognize the value of the asset that we have, and we do not need to make a quick or reactive commitment but rather are going to take a long-term measured approach to scaling this facility. Our primary goal is to monetize our electric capacity and existing infrastructure in the most profitable way possible. And I am unbelievably excited for what it will be.

Speaker Change: Next door.

Speaker Change: Our positioning in Texas also allows us to benefit from the competitive deregulated market structure employed by the ERCOT grid and a relatively high degree of renewables in the region given the feasibility of wind and solar Gen.

Christopher Ferraro: John. Last quarter, we expanded our campus by purchasing an additional 160 acres adjacent to Helios. We now have a total of 320 acres of contiguous land, and we've submitted additional load studies and new interconnect requests that are pending approval to service our expanded footprint and expected future growth at Helios. Additionally, the Helios campus has the opportunity to enhance our network presence by connecting to existing long-haul dark fiber roots that provide scalable bandwidth, low latency, and redundancy between the Helios campus and the Dallas area. We have done the work to define the engineering requirements, receive quotes on the components required, and reviewed proposals to construct scalable fiber for the Helios campus.

Speaker Change: Last quarter, we expanded our campus by purchasing an additional 160 acres adjacent to Helios. We now have a total of 320 acres of contiguous land and we've submitted additional load studies and new interconnect requests that are pending approval to service, our expanded footprint and expected future growth at Helios.

Speaker Change: Additionally, the Helios campus has the opportunity to enhance our network presence by connecting two existing long haul dark fiber routes that provides scalable bandwidth low latency and redundancy between the Helios campus in the Dallas area.

Christopher Ferraro: When we acquired Helios back in December of 2022, our thesis was simple. To be a leader in the Bitcoin mining industry over time, you need one to own your own infrastructure and two to have access to low cost power at scale. Our Helios acquisition checked these boxes, and we've seen that in the ongoing success of our mining operations. However, as we've scaled, we've also seen the opportunity set in front of us rapidly evolve. Advancements in both AI and HPC industries are driving what appear to be the early innings of an insatiable demand for data center capacity, with access to low cost power and with the ability to scale on an expedited timeline.

Christopher Ferraro: We have been evaluating the sector and the possibility of utilizing Helios beyond the scope of just Bitcoin mining for the past several months. With land to scale and approved interconnection of 800 megawatts, long lead time components already acquired and scheduled to be energized, access to water and a low cost power. Helios is positioned to be one of the most optimal sites to build and operate large scale data centers for a variety of different computing applications. We recognize the value of the asset that we have, and we do not need to make a quick or reactive commitment, but rather are going to take a long-term measured approach to scaling this facility.

Christopher Ferraro: Our primary goal is to monetize our electric capacity and existing infrastructure in the most profitable way possible, and I am unbelievably excited for what has to come. The strong performance of each of our three operating businesses in the first half of this year underscores the strength of our diversified business model and our ability to both support and capitalize on the influx of institutional capital into the digital asset ecosystem.

Chris Ferraro: The strong performance of each of our three operating businesses in the first half of this year underscores the strength of our diversified business model and our ability to both support and capitalize on the influx of institutional capital into the digital asset ecosystem. I'm more confident than ever in Galaxy's strategic vision and our team's ability to drive continued growth and success. Alex, over to you.

Christopher Ferraro: I am more confident than ever in Galaxy's strategic vision and our team's ability to drive continued growth and success.

Alex: In the second quarter, we reported a net loss of $177 million, primarily driven by reduced values of digital assets after a steep run-up of prices in the first quarter. As a point of reference, at the end of this quarter, we held more than 900 million of net long digital assets and spot Bitcoin ETFs. For the first half of the year, we generated $245 million in net income driven by positive digital asset price movements and strong operating business performance, as described by Chris, with strong momentum heading into the second half of this year.

Alexander Ioffe: Alex, over to you. Thank you, Chris. Good morning.

Michael Novogratz: In the second quarter, reported the net loss of 177 million, primarily driven by reduced value of digital assets after a steep run up of prices in the first quarter. This affected our digital assets and investment line items on the piano. As a point of reference, at the end of this quarter, we held more than 900 million of net long digital assets and spot Bitcoin ETFs. Our equity capital was 2.1 billion as of June 30th. We opportunistically completed a capital raise of 120 million net of fees during the second quarter. For the first half of the year, we generated 245 million in that income driven by positive digital asset price movements and strong operating business performance described by Chris with strong momentum heading into the second half of this year.

Michael Novogratz: Our operating expenses increased by approximately 16% quarter over quarter, primarily driven by an accounting measure that requires Galaxy to capture staking rewards that Galaxy generates from staking for others on a gross basis, in lending and staking revenue with rewards passed through to the customers that delegate to us, shown as an expense. This business grew sufficiently to have a new line item on the P&L—named staking costs. Excluding gross stops staking costs, we decreased our operating expenses by approximately 5% quarter over quarter. Our liquidity remains strong. Our total liquid assets were 1.3 billion at the end of this quarter, consisting of 409 million of cash and stable coins, 501 million of net digital assets excluding stable coins, and 418 million in spot Bitcoin ETFs.

Alex: Our liquidity remains strong. Our total liquid assets were $1.3 billion at the end of this quarter, consisting of $409 million of cash and stablecoins, $501 million of net digital assets, excluding stablecoins, and $418 million of spot Bitcoin ETF.

Michael Novogratz: We continue to make progress on our U.S. listing. Last Friday, we filed an amendment to our registration statement responding to the seventh round of SEC comments. We feel encouraged by the progress we have made, and by the last set of comments from the SEC staff. We will keep you updated as we continue to advance through this process.

Michael Novogratz: We continue to make progress on our U.S. list or a crypto speech at the Nashville Bitcoin Conference, which if I had written, it would have been a dream. Like he left everything in our industry. And how do we go from here to there? Listen, even on the Democratic side, which had been, you know, really not, not helpful to our industry the last four years, we've already seen a big shift towards pro-innovation and pro-crypto.

Michael Novogratz: Now, I will turn the call over to Mike, and then we will take questions. Guys, good morning. It's a beautiful day here in New York, and let me want to kind of mark this moment. I know we're supposed to talk about our quarter, but we're kind of in a spectacular place for this industry. I have literally never been more bullish on Galaxy, and never been more bullish on our whole industry. And so, when I think about two years ago, even, we were often seen as pariahs, like what's up with this industry? Do we trust them?

Michael Novogratz: And let me, 24 months later, we have a presidential candidate who made a Bitcoin speech, our crypto speech at the Nashville Bitcoin conference, which if I had written, it would have been a dream, like he left everything in that our industry once. And how do we go from here to there? Listen, even on the Democratic side, which had been really not helpful to our industry in the last four years, we'd already seen a big shift towards pro-innovation and pro-crypto, and I am fairly certain and hopeful that nominee Harris, Kamala Harris, the Vice President, is going to soon make comments that show that she's from San Francisco, the land of innovation, and that she wants to be a pro-innovation pro-crypto president.

Speaker Change: Speech at the Nashville Bitcoin conference.

Speaker Change: If I had written it would've been a dream.

Speaker Change: Like he he left everything and that our industry wants and how do we go from here to there.

Speaker Change: Listen even on the Democratic side, which had been.

Speaker Change: Really not not helpful to our industry. The last four years, we had already seen a big shift towards pro innovation and pro crypto and I am fairly certain and hopeful that you know.

Michael Novogratz: And I am fairly certain and hopeful that, you know, nominee Harris, Kamala Harris, the Vice President, is going to, soon, you know, make comments that show that she's from San Francisco, the land of innovation, and that she wants to be a pro-innovation, pro-crypto president. And so hats off to everybody at Galaxy that has worked so hard. I literally want to just, you know, start by saying I couldn't be more bullish and, quite frankly, thankful to everybody because this is, you know, Galaxy has done our part 100%.

Speaker Change: Harmony Harris Kamala Harris, the Vice President is going to.

Speaker Change: Soon it will.

Speaker Change: <unk> comments that show that she is from San Francisco.

Speaker Change: The land of innovation and that she wants to be a pro innovation Pro crypto President.

Michael Novogratz: And so, hats off to everybody at Galaxy that has worked so hard to build this acceptance to everyone in the community. We are now a political voice. I said over and over there, 80 million crypto owners; that's more people that own dogs in America, and I think people are finally listening, right? Crypto is here to stay, Bitcoin is here to stay, our industry is here to stay, and that, beyond anything, is wildly important for how I look at this business, how Chris looks at this business, and how Galaxy is prosecuting this business. We come at this with a whole new renewed sense of confidence.

Speaker Change: Yeah.

Speaker Change: And so hats off to everybody at Galaxy that has worked so hard.

Michael Novogratz: The, you know, you never get the timing perfect on when this happens, but I am fairly certain we will get a market infrastructure bill in the next six to 12 months. We will get a stable coin bill, and maybe more importantly, we'll get direction to the Fed and the OCC to allow the trade-fi companies to participate in our industry. And that will bring in a wave of capital. And so, you know, what does capital do? It drives prices up, but more importantly, it drives innovation. It drives people into the space. And so, I literally want to just, you know, start by saying I couldn't be more bullish.

Michael Novogratz: And quite frankly, thankful to everybody, because this is, you know, Galaxy has done our part 100%, but it's taken an entire movement to really orangepill, you know, the majority of skeptics out there, who now see Bitcoin as an asset class, and the C-Cripto as an asset class, and who believe in the transformative power of this decentralized technology. And so, starting there, like what does that mean? It means that, in time, we're going to have a lot more competition. And so, I think that's a great thing, right? Competition makes you sharper. One way we've approached that is, we're already in great partnerships with lots of, you know, powerful trade-fi companies.

Michael Novogratz: But it's taken an entire movement to really orangepelt, you know, the majority of skeptics out there who now see Bitcoin as an asset class and DCC as an asset class and who believe in the transformative power of this decentralized technology. Starting there, what does that mean? It means that, in time, we're gonna have a lot more competition, and so I think that's a great thing, right? Competition makes you sharper.

Speaker Change: I'll see pick one as an asset class because he sees see crypto as an asset class and who believe in the transformative power of this decentralized technology.

Speaker Change: And so stock.

Speaker Change: Starting there like what does that mean it means that in time, we're going to have a lot more competition.

Speaker Change: And so I think that's a great thing right competition makes you sharper one way we've approached that is we're already.

Michael Novogratz: One way we've approached that is we're already in great partnerships with lots of powerful trading companies. And I think our evolving role will probably include a lot of those, and so I couldn't be more bullish. Listen, the macro backdrop is also helpful.

Speaker Change: And great partnerships with lots of <unk>.

Speaker Change: Powerful trade Phi companies and I think our evolving role will probably include a lot of those.

Michael Novogratz: And I think our evolving role will probably include a lot of those, helping people access on shame, helping people access our acumen. The partnership with pastry comes to mind. And so, you're going to see more of that in the future, I think, from us, and probably from other crypto companies. We're already seeing the changes, right?

Speaker Change: Helping people access unchain, helping people access our acumen.

Speaker Change: The partnership with State Street comes to mind.

Speaker Change: And so youre going to see more of that in the future I think from us and probably from other crypto companies.

Michael Novogratz: You might not have noticed, but Steve Fulham, who is the mayor of Jersey City and a friend of mine, their pension fund is invested in Bitcoin, right? The state of Michigan's pension fund has invested. And so, I think I'm going to see more and more institutions. You know, in 2015, I started talking about the herd as coming. And I meant the institutions would come to Bitcoin. And I was way early, and probably looked a little silly for a long time. Let me tell you, the herd is now here. We get calls every day from new clients who want to either understand or participate in this ecosystem.

Michael Novogratz: And so, I would guess that our business grows quarter on quarter, you know, for the foreseeable future. I say, I guess I see it. I see our sales force being more stressed as people went on board. I see our bankers doing more pitches. I see our asset management group coming up with more products. And so, it couldn't be more bullish. Listen, the macro backdrop is also helping, right? The global economy is slowing period. And the Fed will be cutting rates in September unless something dramatic happens. You know, lowering rates adds to the narrative of crypto.

Michael Novogratz: Cutting rates in September, unless something dramatic happens, uh, you know lowering rates adds to the narrative of crypto. The other thing I would say is that we have two candidates running for president in America, and neither of them have talked about cutting the deficit. Neither of them have talked about... reducing spending on entitlements, right?

Michael Novogratz: The other thing I would say is we have two candidates running for president in America. And neither of them. Have talked about cutting the deficit. Neither of them talked about reducing, reducing spending on, on entitlements, right, Social Security and Medicare, reforming Social Security and Medicare over the, and they're very politically unpopular things to talk about. We're at 35 trillion dollars of debt. We are adding a hundred, we're adding a trillion dollars of debt every 100 days. And until that paradigm shifts, it's hard to see it shifting Bitcoin as a store of value. Bitcoin as digital goal is going to have an amazing appeal to investors around the world.

Michael Novogratz: Social Security and Medicare, reforming Social Security and Medicare over the, and they're very politically unpopular things to talk about. We're at $35 trillion in debt. We are adding a hundred, we're adding a trillion dollars of debt every 100 days. And until that paradigm shifts, and it's hard to see it shifting, Bitcoin as a store of value, Bitcoin as digital gold, is gonna have an amazing appeal to investors around the world. And Bitcoin has traditionally driven our whole industry. Money comes into Bitcoin, and then it finds its way into the rest of the industry. And so I think we've got a macro backdrop. Now we have a political backdrop.

Speaker Change: We're at $35 trillion of debt, we are adding 100.

Speaker Change: Adding a trillion dollars of debt every 100 days.

Speaker Change: And until that paradigm shifts and it's hard to see it shifting.

Speaker Change: Bitcoin as a store of value Bitcoin is digital goal is going to have our amazing appeal to investors around the world and bitcoin is traditionally driven our whole industry money comes in a bitcoin then it finds its way into the rest of the industry and so I think we've got a macro backdrop now we have a political backdrop, that's all bullish.

Michael Novogratz: And Bitcoin has traditionally driven our whole industry. Money comes in a Bitcoin, then it finds its way into the rest of the industry. And so I think we've got a macro backdrop. Now we have a political backdrop. That's all bullish. And listen, you know, Galaxy, I couldn't be more proud of what's happening here.

Michael Novogratz: That's all bullish. And listen, you know, Galaxy; I couldn't be more proud of what's happening here. Chris did a nice job of going through the quarter and through some of the really exciting things.

Speaker Change: And listen.

Speaker Change: Galaxy I couldn't be more proud of what's happening here, Chris did a nice job of.

Michael Novogratz: Chris did a nice job of, you know, going through the quarter and through some of the really exciting things. But when I think about digital infrastructure, one of our three businesses, right, this mining stuff is real. AI is not going away. The big, you know, companies, Google, Meta, you know, Microsoft, OpenAI, their CapEx budget on data centers is, you know, supposed to be 300 billion a year, as far as the eye can see. We are going to participate in that. We have gotten very focused on this Helios asset. Chris was just down there yesterday. And so, you know, stay tuned, but that's very exciting.

Speaker Change: Going through the.

Speaker Change: Through the quarter and through some of the really exciting things, but when I think about digital infrastructure one of our three businesses.

Michael Novogratz: But when I think about digital infrastructure, one of our three businesses, right? This mining stuff is real. AI is not going away.

Michael Novogratz: The big, you know, companies, Google, Meta, you know, Microsoft, OpenAI, their CapEx budget on data centers is, Jason Urban and his team, new clients, you know, record derivative exposure, our lending business continues to grow, and so I'm bullish. And, you know, couldn't be more excited for the future. Hello.

Speaker Change: Right. This mining stuff is real AI is not going away.

Speaker Change: The big.

Michael Novogratz: And then the staking business, you know, out of nowhere six months ago, we're now over $3 billion of assets staked and growing. And I think that's going to be a bigger and bigger business for us. And so, like digital infrastructure feels pretty good for me. Our asset management business Steve person is team are hustling new products. We launched our first in-house venture fund. Right, we've always done venture on the balance sheet. Now we're bringing clients into that expertise, and that's exciting. And so asset management is working in our flagship, you know, our markets business. Jason Urban and his team.

Michael Novogratz: New clients, you know, record derivative exposure. Our lending business continues to grow. And so, couldn't be more bullish there.

Michael Novogratz: And so when I wrap it all up, I'm bullish. And, you know, couldn't be more excited for the future.

Operator: Hello.

Operator: By operator, I think we're ready to open it up for questions. Thank you at this time. If you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue by pressing star two. Once again, that is star one to ask a question. And we will pause for a moment to allow everyone an opportunity to signal.

Operator: Operator, I think we're ready to open it up for questions. Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue by pressing star two.

Operator: Once again, that is star number one to ask a question, and we will pause for a moment to allow everyone an opportunity to signal. And we'll take our first question from Joseph Vafi from Canaccord. Yeah. Hey, Joe. Good morning.

Joseph Vafi: And we'll take our first question from Joseph Vaffy from Canaccord. Hey guys, excuse me, good morning. Great to see all the operational progress and the industry backdrop here looking a little bit better. I was wondering, I know Chris, you mentioned that your loan book was up while volumes were down. I mean, I think that's a sign of gaining share.

Speaker Change: Yeah.

Speaker Change: No.

Joseph <unk>: And we'll take our first question from Joseph <unk> from Canaccord.

Joseph: Hey, guys.

Joseph: Excuse me good morning, great to see all of the operational progress and.

Speaker Change: The industry backdrop here looking a little bit better.

Speaker Change: I'm wondering I know I know, Chris you mentioned that your loan book was up while volumes were down I mean, I think that's a sign of.

Speaker Change: Gaining share or are there any other metrics to point to and in the markets business on potential share gains and how you look at your position there and then a quick follow up.

Christopher Ferraro: Are there any other metrics to point to in the market's business on potential share gains and how you look at your position there, and then I'll a quick follow up? Yeah, hey Joe, good morning. I appreciate you joining. Thanks for the question. Yeah, so loan book was one big metric that we looked at. That's been part of our bread and butter at the firm from generating good risk-adjusted returns with our capital from the very beginning. So we're excited about that growing, and we're actually looking to the future of that. That business today is still a largely bilateral relationship with our clients on a one-off basis.

Speaker Change: Okay.

Chris Ferraro: I appreciate you joining us. Thanks for the question. The loanbook was one big metric that we looked at. That's been part of our bread and butter at the firm, from generating good risk-adjusted returns with our capital from the very beginning. So we're excited about that growing, and we're actually looking to the future of that. That business today is still a largely bilateral relationship, trade opportunities with clients. We're actually directly financing trades and holding those trades in a prime brokerage-like fashion.

Christopher Ferraro: The Galaxy ones development focus on the go forward is really tying that into trade opportunities with clients. We're actually directly financing trades and holding those trades in a prime brokerage-like fashion. That margin-based financing product we're already in testing on is pretty excited to launch, and it's the focus for the back half of the year. And so on a go forward basis, that lending business, we think at the opportunity to scale even a lot faster than we've done. Sort of one off hand to hand, that book generated approximately $11 million in that profit so far. The other metrics in the business we look at are, you know, there's a bunch going on.

Chris Ferraro: That margin-based financing product we're already in testing on and are pretty excited to launch, and it's the focus for the back half of the year. And so, on a go-forward basis, that lending business, we think, has the opportunity to scale even a lot faster than we've done sort of one-off hand-to-hand combat, which is historically growing the book. And to add a little more color on the lending business alone, that book generated approximately $11 million in net profit so far. The other metrics in the business we look at are, you know, there's a lot going on. The crypto spot exchange volumes were down 18% quarter over quarter in the second quarter.

Christopher Ferraro: The crypto-spot exchange volumes were down 18% quarter over quarter in the second quarter. And so, you know, while we had our businesses, volumes and revenue declines were similarly in line. The same token is that the other thing we pointed to was we have been growing our derivative volume fast and much faster in a declining market than we see on the screens and then we see with our competitors. And so that business having crossed through 8 billion of TTM, notional volume and then jumping to 13 now just year to date alone. I think is a both a pretty tangible data point in where we obviously have edge and where we're getting share.

Chris Ferraro: And so, you know, while we had, our businesses' volumes and revenue declines were similarly in line. The same token, the other thing we pointed out was that we have been growing our derivative volume fast and much faster in a declining market than we see on the screens and then we see with our competitors. And so that business having crossed through 8 billion of TTM, notional volume, and then jumping to 13 now just year to date alone, I think is both a pretty tangible data point on where we obviously have an edge and where we're gaining share.

Speaker Change: While we had our.

Speaker Change: Our business as volumes and revenue declines were similarly in line. The same token is the other thing we pointed to was we have been.

Speaker Change: Growing our derivative volume fast and much faster in a declining market than we are.

Speaker Change: Then we see on the screens and then we see with our competitors and so that business having crossed the two 8 billion of TTM notional volume and then jumping to 13 now just year to date alone.

Speaker Change: I think as a both a pretty tangible data point in where we obviously have edge and where we're gaining share and it's also a business that is.

Chris Ferraro: And it's also a business that has a motor around it because it's complicated to manage risk there, requires capital, requires pretty heavy regulatory infrastructure around it, which we now have in our, you know, one of one or one of two in the market who even have that. And it provides us an opportunity to really have a base of profitability as opposed to, you know, the base spot business, which, generally, in crypto and across all TradFi assets, is really a scratch at the best kind of business.

Christopher Ferraro: And it's also a business that has a motor around it because it's complicated to manage risk; there requires capital, requires pretty heavy regulatory infrastructure around it, which we now have in our one or one or two in the market who even have that. And it provides us an opportunity to really have a basic profitability as opposed to, you know, the base spot business which generally encrypt don't and across all drift traffic assets is really a scratch at best kind of business.

Speaker Change: Has a moat around it because it's complicated to manage risks there requires capital requires.

Joseph Vafi: And so that's what I would point to you. Sure, that's great. Thanks, Chris. And then, you know, on Helios, you know, it's still kind of early days on, you know, maybe monetizing the asset other than Bitcoin. But in a sense, maybe it's not that early, you know, if you've got, I think it's over 200 megawatts that are going to be energized next year.

Chris Ferraro: And so that's what I would point to. And then, you know, on Helios, it's still kind of early days on, you know, maybe monetizing the asset other than Bitcoin. But in a sense, maybe it's not that early, you know, if you've got it.

Christopher Ferraro: So just, you know, just kind of wanted to drill down there on, you know, how, you know, I know you're going to try to monetize it the best way possible, but any other additional color, especially on this, you know, next phase of energy's energization since it's coming, you know, what you're looking at, you know, potential timing on any deals, et cetera. Thanks a lot. Yep. So let me start by being more specific and clarifying what we see as the electrical roadmap, so the capacity for electricity. Right. So today, we have 200 megawatts, energize and operating consistently every day, dedicated towards Bitcoin.

Mike: And operating consistently every day dedicated towards that quite Mike.

Christopher Ferraro: The big electrical infrastructure that we have installed and is going to be energized this time next year adds another 300 megawatts of electrical capacity that currently does not have a tie into an existing data center that exists there today. And so that additional 300 megawatts is available for either us to develop an additional data center capacity that be one and a half x our current size for Bitcoin mining or to greenfield a data center dedicated towards other uses that this time next year from it from a base electrical capacity, which is really the most important foundation for anything we're going to do next.

Speaker Change: The.

Speaker Change: The big electrical infrastructure that we have installed.

Speaker Change: And is going to be energized. This time next year adds another 300 megawatts of electric capacity that currently does not have a tie in to an existing data center that exists there today and so that additional 300 megawatts.

Speaker Change: Is available for either us to develop.

Speaker Change: A a additional data center capacity that'd be one and a half X. Our current size for bitcoin mining ore to Greenfield a datacenter dedicated towards other uses that.

Speaker Change: This time next year from it from a base of electrical capacity, which is really the most important foundation for anything we're going to get X.

Christopher Ferraro: It gets us to 500 megawatts, and we can increase that further to 800 megawatts by 2027, which is our what we're currently approved for. Now, I think you've probably seen other people in the market throw out, like, you know, big numbers on their electrical capacity and how big they could be. The fact for us is, in addition to our 800 megawatts that we already have approved, and we have the long lead time infrastructure purchased and installed already. We have two other work streams that can more than triple that capacity over the long, long term. One is an additional 800 megawatts that we've done the low studies for that we've submitted, which relate to our existing tie-in at the existing substations.

Speaker Change: It gets us to 500 megawatts and and we can increase that further to 800 megawatts.

Chris Ferraro: Yep, people in the market throw out big numbers on their electrical capacity and how big they could be. The fact for us is, in addition to our 800 megawatts that we already have approved, and we have the long-lead time infrastructure purchased and installed already, we have two other work streams that can more than triple that capacity over the long, long term. One is an additional 800 megawatts that we've done load studies for that we've submitted, which relate to our existing tie-in at the existing substation.

Chris Ferraro: So that would be capacity going from 800 already approved to 1.6 gigawatts. And then we have also submitted for an additional interconnect with ERCA and WET for the new LAN we purchased, which is for another 900. And so 1.6 would go to 2.5 gigawatts total on our existing LAN footprint at Helios, assuming, over time, we get that approved. And that is a massive scale of electricity relative to any other asset in the country in terms of potential for unlocking opportunities.

Christopher Ferraro: So that that would be capacity going 800 already approved to 1.6 gigawatts. And then we have also submitted for an additional interconnect with Irka and Wet for the new land we purchased, which is for another 900. And so 1.6 would go to 2.5 gigawatts total on our existing land footprints ad helios, assuming over time we work with the we we get that approved. And that is a massive scale of electricity relative to anybody, any other asset in the country in terms of potential on locking opportunity.

Chris Ferraro: In terms of what we do next, I think it's, we feel like it's a little premature to land on anything specifically, but what I would say is we have been, relentlessly investigating and having higher and higher level conversations with the biggest companies in and around HPC and AI data centers around a number of different potential models as that industry opportunity develops. And those models range anywhere from partnerships on greenfielding new dedicated data centers for specific AI or HPC end uses with partners for our electricity capacity growth that we have there to potentially retrofitting existing data center capacity, which the bar is higher for us because there's an opportunity cost because we have a great Bitcoin mining business already today, to partnering in joint ventures with those operators or chip manufacturers to operate AI as a service, for example, in certain megawatt, like small megawatt clusters within our existing data center or in the data center growth that we're going to pursue.

Christopher Ferraro: In terms of what we do next, I think it's it's we feel like it's a little premature to to land on anything specifically, but what I would say is we we have been relentlessly. Investigating and having higher and higher level conversations with the biggest companies in and around HPC and AI data centers around a number of different potential models as that industry opportunity develops, and those models range anywhere from. Partnerships on green fielding new dedicated data centers for very for specific air HPC and uses with partners for our grow our electricity capacity growth that we have there to to potentially retrofitting existing data center capacity, which which the bars higher for us because there's an opportunity cost because we have a great Bitcoin mining business already today.

Joseph Vafi: To partnering in joint ventures with those operators or chip manufacturers to operate AI as a service, for example, in certain megawatt-like small megawatt clusters within our existing data center or in the data center growth that we're going to pursue. So there's like there's actually a pretty wide pallet of opportunity sets, all of which sort of are partner dependent and use dependent capital need and economics dependent, but all of which are. Super-exciting economically, we think, relative to just our basic existing business that we built today. That's great. A lot to do, exciting stuff, exciting times. Thanks a lot, Chris and everybody else.

Speaker Change: Data center or in the data center growth that we're going to we're going to pursue.

Chris Ferraro: So there's actually a pretty wide palette of opportunity sets, all of which sort of are partner dependent, end use dependent, capital need, and economics dependent, but all of which are. That's great. A lot to do, exciting stuff, exciting times.

Speaker Change: There's like there's actually a pretty wide pallet of opportunity sets, all of which sort of our partner dependent and use dependent capital.

Speaker Change: Need and economics dependent.

Speaker Change: But all of which are <unk>.

Speaker Change: Super exciting economically we think relative to just our base existing business that we built today.

Michael Novogratz: Thanks a lot, Chris and everybody else. And we'll take our next question from Martin Toner from ATB Capital Markets: some of the regulation you mentioned would do for you. Yeah, listen, one of the great overhangs that our whole industry has had is the fear of, and BSEC Wells Notice. The fear of the Department of Justice saying, hey, you're trading assets that we think are securities and you think are not secure. And so just the clarity around a market infrastructure bill, which tells you what is what, who regulates what, will unleash people's confidence to invest in this business from the players here, but more meaningfully will unleash, are significantly higher than they would be if we were a trade pipe, partly because of this uncertainty. And so the biggest, and in some ways, you know, I was arguing this in D.C. 12 months ago, it doesn't even matter how perfect the bill is.

Speaker Change: That's great.

Speaker Change: What to do exciting stuff exciting time, thanks, a lot, Chris and everybody else.

Speaker Change: Oh.

Speaker Change: Yeah.

Martin Toner: And we'll take our next question from Martin Toner from ATB Capital Markets. Thank you very much for taking my question. I want to circle back to Mike's comments about Trump's speech and regulation. Mike, can you talk a little bit about what some of the regulation you mentioned would do for your business? Yeah, listen, one of the great overhangs that our whole industry has had is the fear of the SEC Wells notice, the fear of the Department of Justice saying, hey, you're trading assets that we think are securities and you think are not securities. And so just the clarity around a market infrastructure bill, which tells you what is what, who regulates what?

Speaker Change: And we'll take our next question from Martin Toner from ATB capital market.

Martin Toner: Thank you very much for taking my question.

Martin Toner: I wanted to circle back to.

Mike: Mikes comments about.

Michael Novogratz: Will unleash people's confidence to invest in this business from the players here, but more meaningfully, will unleash asset managers' willingness to hold these assets. And so it's been the uncertainty and, quite frankly, the cost, right? Our legal costs, our counting costs are significantly higher than they would be if we were to trade by companies, partly because of this uncertainty. And so the biggest, in some ways, I was arguing this in DC 12 months ago, it doesn't even matter how perfect the bill is.

Michael Novogratz: I now think we're going to get a very good bill. But even back then, I was like, just give us the bill because it takes the uncertainty down. And so that's the first thing. The second thing, I guess, is around what we've called Operation Showpoint 2.0. There was a determined and methodical move amongst the government to really stifle crypto innovation. Banks were told, don't lend to crypto people.

Michael Novogratz: I now think we're going to get a very good bill, but even back then I was like, just give us a bill because it takes the uncertainty down.

Michael Novogratz: And so that's the first thing. You know, the second thing I guess is around what we've called Operations 0.2.0. There was a determined and methodical move amongst the government to really stifle crypto innovation. Banks were told, don't lend a crypto people. Plenty of cases where, you know, clients of ours, friends of ours, had their accounts shut down at major institutions because they were involved in this industry. That's changing. It will change really fast when it gets, when it gets direction from the top. And I think certainly the Republican side has said that's coming. I believe the Democrats side will as well.

Speaker Change: 2.0, there was a determined and and methodical move amongst the government to really stifled crypto innovation banks were told don't lend to crypto people.

Michael Novogratz: Lots of cases where, you know, clients of ours, friends of ours, had their accounts shut down at major institutions because they were involved in this industry. Keith Jeffries was very open-minded to crypto. Richie Torres.

Speaker Change: Plenty of cases, where.

Speaker Change: Clients of ours friends of ours had their account shutdown at major institutions, because they were involved in this industry.

Martin Toner: That's changing it.

Martin Toner: It will change really fast when it gets when it gets.

Martin Toner: Direction from the top and I think certainly the Republican side has said that's coming.

Martin Toner: I believe the Democrats side will as well they haven't done it yet and so it's early.

Michael Novogratz: They haven't done it yet. And so, you know, it's early; you know, Vice President Harris has only been in this seat for less than 10 days. But all my intel and all my instinct tells me, and I think what is best for crypto is that this is bipartisan. I'm working really hard on the Democratic side now. Mostly because we don't want to be a one-party industry. We're a technology at a movement, and it should be bipartisan. And if we get the Democrats to go where I think they're going, and plenty of already were already there.

Speaker Change: Vice President Harris has only been in this seat for less than 10 days.

Speaker Change: But all my Intel and all my Instinct tells me and I think what is best for Crypto is that this is bipartisan I'm working really hard on the Democratic side now.

Michael Novogratz: I keep Jeffries was very open minded to crypto Richie torus. There's a there's a litany of Democrats that were supporting. Then it's like yachts, as Arthur Hayes would say. And now we got both sides, and we can be less worried about who wins in Washington, more worried about prosecuting our business. Business. And so, listen, when Joe Biden stepped down, Elizabeth Warren's power was diminished immensely. And she was the one who really was slowing down the growth of crypto. I chatted banner ads, like Join my anti crypto army. And so not a real good look if, if you're a crypto voter.

Michael Novogratz: There's a litany of Democrats that we're supporting. Then it's like Yahtzee, as Arthur Hayes would say, and now we've got both sides, and we can be less worried about who wins in Washington and more worried about prosecuting our business. And so, listen, when Joe Biden stepped down, Elizabeth Warren's Digital Asset Prices in Q1. Excuse me, Q2.

Michael Novogratz: And I think, you know, her influence is waiting; we will see.

Michael Novogratz: But I think that's, that's really the will be the big shift. If Republicans win, it's, you know, he laid out a plan that is unbelievably bullish for our industry. I'm hoping, thinking that Democrats are going to be something similar. That's great.

Michael Novogratz: Thanks very much.

Michael Novogratz: So we had a bumpy quarter for digital asset prices in Q1, excuse me, Q2. Can you talk a little bit to Galaxy, specifically global GGM strategy to, you know, make money, not lose money. And what you did with leverage over the quarter. Sure. Listen, so our franchise businesses, right, the businesses that buy and sell with clients that lend the clients that deliver those clients. As Chris said, volumes there were down roughly in line with the volumes in the overall industry. And profits came down accordingly, but still a profitable. Business, our balance sheet, I'll call it Treasury.

Michael Novogratz: Can you talk a little bit about Galaxy, specifically its global GGM strategy to make money, not lose money, and what you did with leverage. Sure.

Speaker Change: Over the quarter.

Chris Ferraro: Listen, so our, Our franchise businesses, right, the businesses that buy and sell with clients, that lend to clients, that do derivatives with clients, as Chris said, volumes there were down, roughly in line with the volumes in the overall industry. And profits came down, business. Our balance sheet, I'll call it treasury call it a billion dollars crypto and crypto went down 14% and there's $140 million and that's that's simplifying it, assets that we think are core foundational assets and we trade around others that we think are overvalued in the short run, earlier, I highlighted a strategy that we saw as a market opportunity pretty early on late last year, and we've been executing on, which is this is sort of syndicating lock token deals to clients.

Speaker Change: Sure listen so.

Speaker Change: Sure.

Speaker Change: Our franchise businesses right the businesses that buy and sell with clients that lend to clients that derivatives clients.

Speaker Change: As Chris said volumes there were down.

Speaker Change: Roughly in line with the volumes and the overall industry.

Speaker Change: And profits came down.

Chris: Accordingly, but still a profitable.

Speaker Change: Uh huh.

Speaker Change: Business our balance sheet.

Speaker Change: I'll call it treasury.

Michael Novogratz: You know, we were long call it a billion dollars crypto and crypto and down 40% and there's 140 million dollars. And that's, that's simplifying it. With hindsight, I guess I was long less crypto and, you know, so more on the, so more on the high and bought more on the low. So, in general, we try to outperform the overall market, but we have a very long bias to this firm. I believe Bitcoin will be a lot higher a year from now. I believe digital assets as a total market cap will be a lot higher a year from now.

Speaker Change: We were long.

Speaker Change: Call It $1 billion of crypto and crypto went down 14% and there was $140 million I mean, that's simplifying it.

Speaker Change: With hindsight, I guess I wasn't long less crypto and <unk>.

Speaker Change: So more and sell more on the high end bought more on the low.

Speaker Change: In general we try to outperform the overall market, but we have a very long bias to this firm.

Speaker Change: I believe bitcoin will be a lot higher a year from now.

Michael Novogratz: And so, again, we try to stay long assets that we think are core foundational assets, and we trade around others that we think are overvalued in the short run. But this was mostly just the beta move.

Christopher Ferraro: Yeah, and a couple of things I'll add. One, you know, I, in my comments earlier, highlighted a strategy that we saw as a market opportunity pretty early on. Last year, and we've been executing on, which had really, which is this sort of syndicating lock token deals to clients. And that, that is an example of things that that business has done to evolve to turn what is a transactional, largely transactional revenue-driven business into something that has a base of recurring revenue. And so, when we bring clients on platform by facilitating purchases of assets that have a long term lockups that are going to sit on our platform and be clients on our platform by definition for years, that also generate annual management fees and provide captive clients to then add trading services.

Chris Ferraro: And that is an example of things that that business has done to evolve to turn what is a largely transactional revenue-driven business into something that has a base of recurring revenue. And so when we bring clients on the platform by facilitating purchases of assets that have long-term lockups that are going to sit on our platform and be clients by definition for years, that also generate annual management fees and provide captive clients to then add trading services, those are the kinds of things that we do that we do to build balance in the business that don't necessarily wax and wane with the price of crypto directly every day.

Christopher Ferraro: Those are the kinds of things that we do that we are doing to build ballots in the business that don't necessarily wax away with the price of crypto directly every day. And, and the cool thing about that whole platform and GGM now is it's starting to reach across and connect to other parts of the business, like our blockchain infrastructure group. Where those assets and the clients of that group then have an opportunity to stake their assets with our own blockchain nodes, which also creates a recovery revenue line item. Also have some level of correlation to the price of crypto like that is that is something that is impossible to eliminate solely in our industry today.

Chris Ferraro: And the cool thing about that whole platform in GGM now is it's starting to reach across and connect to other parts of the business, like our blockchain infrastructure group, where those assets and the clients of that group then have an opportunity to stake their assets on our own blockchain nodes, which also creates a recurring revenue line item. All still have some level of correlation to the price of crypto, so that is something that is impossible to eliminate solely in our industry today but create sticky revenue streams that, while they have some correlation, are sort of there quarter in, quarter out.

Christopher Ferraro: But create sticky revenue streams that, while they have a correlation, are sort of there quarter and quarter out. And the more we layer those on top of one another, the more the quarter-quarter movements in the underlying price are going to be a lot less impactful on revenue. Desertics.

Christopher Ferraro: That's that's great Chris. Thank you very much.

Bill Papanastasiou: Last one for me, your curtailment revenue in the quarter, 10 million on five points, that's a hash. You look like you you know punched above your weight.

Christopher Ferraro: Can anyone just talk to the what was that work there? So the 10 million you're referencing, I believe, is actually our total cost to produce, so that that's electricity cost plus plus give up to. Oh, I see. Oh, okay. Yeah, yeah. Okay. Yeah, no. So yeah, so I was going to say so I can address a couple things where I think you're getting at there, which is ultimately in the quarter, we mined in a marginal cost at approximately 22,500 per Bitcoin, which I don't think all the numbers have come out, but I'm pretty confident puts us in the pretty high a pretty high core tile or desk tile in the whole industry in terms of in terms of cost.

Chris Ferraro: And the more we layer those on top of one another, the more the quarterly-to-quarter movements in the underlying price are going to be a lot less impactful on revenues. No, I was gonna say, so I can address a couple things, which is what I think you're getting at there, which is, you know, ultimately, in the quarter, we mined at a marginal cost of approximately $22,500 per Bitcoin, which I don't think all the numbers have come out, but I'm pretty confident puts us in a pretty high quartile or decile in the whole industry in terms of cost.

Chris Ferraro: What we're doing there today, in addition to just the fact that we operate in an area where we correctly selected that on average is gonna generate, have a pretty low cost of electricity, we have been, we've taken the view that riding the index in those markets is the right strategy, and the index has closed significantly lower than where it we otherwise or market participants otherwise would be paying had they hedged out exposure. And so all that is to say that just paying market prices for electricity has been the smart decision to make for the entirety of this year so far.

Christopher Ferraro: But what what what we're doing there today in addition to just just the fact that we we operate in an area where we collect correctly selected that that average is going to generate have pretty low cost of electricity. We we have been we've taken the view that writing index in those markets is the right strategy and index has closed significantly lower than where it we otherwise or market participants otherwise would be paying had they hedged out exposure. And so all that is to say that just paying market price is for electricity has been the smart decision to make for the entire year this year so far, and that's what we've done.

Speaker Change: Pat just paying market prices for electricity has been the smart decision to make for the entirety of this year, so far and that's what we've done in addition to that the flexibility of our load there allows us to sort of shape add some shape too when we mine and when we don't and therefore.

Chris Ferraro: And that's what we did. In addition to that, the flexibility of our load there allows us to sort of Yeah, that's, All right, a question on the Helios asset. [inaudible] understanding what we have, understanding what we would need to invest in to service various potential partners and clients and structures has gone has gone from, you know, has gone from very early exploratory different opportunities that, by the way, are not mutually exclusive

Christopher Ferraro: In addition to that, the flexibility of our load there allows us to sort of shape add some shape to when we mine and when we don't, and therefore the cost that we incur or don't incur her unit of production. And so just to add a little more clarity to that, like in Q2, on average, we mine 22 at a 24 hours per day. And that produced 56% gross margins based on where Q2 power prices were. As an example, just deciding to not mine for the on average those two hours a although it's concentrated when we make those decisions, we reduced cost by 38% in the quarter.

Speaker Change: The cost that we incur are don't incur per unit of production and so just to add a little bit more clarity to that like in Q2.

Speaker Change: On average we mined 22 out of 24 hours per day.

Speaker Change: And that produced 56% gross gross margins.

Speaker Change: Based on where Q2 power prices, where as an example, just just deciding to do not mind for the on average those two hours a day, although it's concentrated when we make those decisions we reduced cost by 38% in the quarter right and so so by taking less than 10% of of your time offline you're reducing.

Christopher Ferraro: Right. And so, so by taking, you know, less than 10% of your time offline, you're reducing cost by almost 40%. That trade off is is a very smart one economically and that think decisions like that and how we operate is what we think have driven have driven our performance to be to be you know pretty pretty best in class.

Speaker Change: <unk> by almost 40% that tradeoff is is a is a very smart one economically.

Speaker Change: Decisions like that and how we operate what we think have driven have driven our performance to be to be.

Speaker Change: Pretty pretty best in class.

Bill Papanastasiou: That's great. Thank you very much. Is that helpful that we are trying to get up? Yeah, and that's great.

Speaker Change: That's great color. Thank you very much is that helpful that what you were trying to get out.

Bill Papanastasiou: That's all for me.

Joseph Flynn: And we'll take our next question from Joe Flynn from Compass Point Research. All right, a question on the Helios asset and it looks like there's significant expansion potential there, but just regard to the early stages with customers accordingly, you know, at the stages of any L.I. sign or, you know, anything you could comment on regarding the structure, you know, whether that be more of a kind of a cost plus type deal for the land or, you know, a co-location where you actually, you know, build the data center and deliver to suit.

Christopher Ferraro: Thanks. Yeah, hey, hey, hey Joe, good morning. We can't donate in report tangibly yet on any specific deals or what the structures look like. I think it's it's it's it's a little early, but the progress we've made over the last quarter in understanding what we have, understanding what we would need to invest in. To service various potential partners and clients and structures has gone has gone from, you know, has gone from. Very early exploratory stage to us having spec'd out how to lay how we're going to lay dark fiber or what it's going to cost us.

Speaker Change: Sort of how we're going to lay dark fiber or what it's going to cost us.

Christopher Ferraro: All that kind of stuff. And so we're, we've made a ton of progress in understanding what what we're going to need to do, what it's going to cost and what the opportunity set is. And we're at the stage now where we are shorting through a number of conversations, very specific conversations on different opportunities that, by the way, are not mutually exclusive. So we the good thing about what we have is we have a campus, both in terms of geographical footprint and electrical footprint. That would allow us to do a number of different things with the site.

Speaker Change: That all that kind of stuff and so we're we've made a ton of progress in understanding what we're going to need to do what it's going to cost and what the opportunity set is and we're at the stage now where we are sorting through a number of conversations very specific conversations on.

Speaker Change: Different opportunities that by the way are not mutually exclusive so the good thing about what we have is we have a campus.

Chris Ferraro: So the good thing about what we have is we have a campus, both in terms of geographical footprint and electrical footprint that would allow us to do a number of different things with the site. But we don't have a...

Speaker Change: Both in terms of geographical footprint and electrical footprint that would allow us to.

Speaker Change: To do a number of different things with the site like we don't have a a.

Christopher Ferraro: Like we don't have a single data center that provides constraints around what kind of deal we could do. We have is a large campus with an incredibly talented team, access to more talent, and our way in the city of Lubbock with Texas Tech, and flexibility to sort of pick and choose how we want to develop the whole footprint in a number of different ways. So that that's the way we're we're thinking about it today. And, you know, we're pretty bullish from pretty excited about what it could be. We're just we're just literally to be able to announce anything or got anyone towards anything specific.

Speaker Change: A single.

Speaker Change: Single data center that.

Speaker Change: Provides.

Speaker Change: Constraints around what kind of deal we could do what we have is a large campus with an incredibly talented team.

Speaker Change: Access to more talent in our way in the city of Lubbock, with Texas Tech and flexibility to sort of pick and choose how we want to develop the whole footprint in a number of different ways. So that's the way we're thinking about it today.

Speaker Change: And we're pretty bullish and pretty excited about what it could be we're just we're just literally to be able to announce anything or got anyone towards anything specific.

Joseph Flynn: That's fair.

Speaker Change: That's fair and then piggybacking off of <unk> question earlier, with blending being up quarter over quarter.

Joseph Flynn: And then you know, piggybacking off a question earlier with London being up, you know, quarter of a quarter.

Michael Novogratz: Can you give a sense of just like what the overall, you know, environment looks like we're crypto, you know, credit conditions, whether they're improving or, you know, we're still relative early what it would take to rejuvenize kind of the space. Yeah, listen, I mean, the crypto credit conditions often track crypto enthusiasm and crypto pricing. And so certainly are improving. And, you know, when people are more optimistic, they want to use more leverage. And so I see that business going up, not down. We have plenty of. People that have created a bunch of crypto wealth that don't want to lose their crypto and will borrow dollars against crypto.

Michael Novogratz: And so you can take in collateral; we are, we are pretty conservative.

Michael Novogratz: Lenders still, I think that DNA comes from Chris's background as a credit guy, not my background as a macro guy. And, you know, we're also lending on chain. And so we're looking at, you know, where do we borrow and where do we lend, and that, that business is growing for us. We injected more talent into it. We're looking at it more systemically; our systematically, I'm sorry. And, you know, as Chris said, once we add prime, if these are going to, hopefully, going to turbo charge it. And so I would hope that 12 months from now, 24 months from now, it's one of our biggest businesses.

Michael Novogratz: I think that DNA comes from Chris's background as a credit guy, not my background as a macro guy. And, you know, we're also lending on Shane. And so we're looking at, you know, where do we borrow and where do we lend and that business is growing for us. We're looking at it more systemically or systematically, I'm sorry. And, you know, as Chris said, once we add Prime, it's either going to, hopefully, turbocharge it.

Michael Novogratz: And so, I would hope that... 12 months from now, 24 months from now, it's one of our biggest businesses. It's one of our most steady revenue generators. Yeah, the only thing I would add is that an important part, in addition to risk management, of building a good financing business is having good consistent access to capital.

Michael Novogratz: It's one of our most steady; rather, the generators.

Christopher Ferraro: Yeah, the only thing I would add is an important part in addition to risk managing of being building a good financing business is having good, consistent access to capital. And so on, on our ends, you know, you've seen since the beginning of the year, we've seen our own book value increase, which is part from performance, part from also raising a small bit of equity, which we did. But you've also seen our balance sheet expand. And so if you just, if you just look at, you know, like debt equity, for example, to give you an order of magnitude, we went from roughly 1.05 times to 1.4 times as a business from the end of the year to June 30th.

Chris Ferraro: And so on our end, since the beginning of the year, you've seen our own book value increase, which is part from performance, part from also raising a small bit of equity, which we did. But you've also seen our balance sheet expand. And so if you just look at debt equity, for example, to give you an order of magnitude, we went from roughly 1.05 times to 1.4 times as a business from the end of the year to June 30.

Chris Ferraro: And a big part of that is our access to be able to borrow capital from clients and from market participants has opened up again after a pretty long wave of everyone being pretty constrained in terms of their willingness to provide credit. And so I think it's an important point just to note that like our ability to manage Galaxy's brand reputation, balance sheet, credit worthiness, and the counterparty's view of our credit worthiness is paramount to our success.

Christopher Ferraro: And a big part of that is our access to be able to borrow capital from clients and from market participants. Has opened up again after a pretty long way of everyone of everyone being pretty constrained in terms of their willingness to provide credit. And so I think it's an important point just to note that like our ability to galaxies, brand reputation, balance sheet, credit worthiness, and the counter parties. Expect the view of our credit worthiness is paramount to our success. And we're proving it by being able to show that we can expand our balance sheet, which would then allow us to use that balance sheet to help clients finance or trace more efficiently.

Chris Ferraro: And we're proving it by being able to show that we can expand our balance sheet, which would then allow us to use that balance sheet to help clients finance their trades more efficiently. And so I think I'd point to that as, like, there's clearly some thawing because, as that thaw occurs, capital flows to the most trusted market participants. And we're seeing that, and we think we're the beneficiary of that early on. We have been trying and continue to try, and we are more optimistic about, you know, redomicizing to the US and enlisting in the US.

Michael Novogratz: And so I think I'd point to that as like, there's clearly something because, because, and when, when, as a thought occurs, capital flows to the most trusted market participants, and we're seeing that, and we're seeing that we think we're the beneficiary of that early on.

Michael Novogratz: And finally, let me put an emphatic point on this. We have been trying and continue to try and are more optimistic of, you know, redomifying to the US and listing in the US. That access to capital markets, which the US really is the dominant platform of, is wildly important to us. And I think once we make that shift, once the SEC opens the gates again and allows crypto companies to tap the US capital markets, you'll see our cost of funding go down. And our businesses grow accordingly. Thank the double.

Chris Ferraro: That access to capital markets, which the U.S. really is the dominant platform in, is wildly important to us. And I think once we make that shift, once the SEC opens the gates again and allows crypto companies to tap into the U.S. capital markets, you'll see our cost of funding go down, and our businesses grow accordingly. And we'll take our final question from Bill Papanastasiou. Hi, good morning.

Speaker Change: The U S really is the dominant platform up is wildly important to us and I think once we make that shift once the FCC opens the gates again allows crypto companies to tap the U S capital markets, you'll see our cost of funding go down.

Speaker Change: And our businesses grow accordingly.

Speaker Change: Thanks, that's helpful.

Bill Papanastasiou: And we'll take our final question from Bill Papanastasiou. Hi, good morning. Thanks for taking my questions. For the first one, I'm wondering whether you could provide your outlook on Bitcoin mining economics over the near-to-medium term in this quarter of Galaxy achieved a marginal cost of mine, as mentioned, of less than $23,000 for Bitcoin, which is not only attractive, but yes, the lowest we've seen thus far. And maybe you can draw some parallels or contrast to the margin profile in the HPC verticals that Galaxy is considering here.

Speaker Change: And we'll take our final question from Bill Popper Nasty Gal.

Operator: Thanks for taking my question. For the first one, I'm wondering whether you could provide your outlook on Bitcoin mining economics over the near to medium term. In this quarter, Galaxy achieved a marginal cost of mine, as mentioned, of less than $23,000 for Bitcoin, which is not only attractive, but, yes, the lowest we've seen thus far.

Speaker Change: Hi, good morning, Thanks for taking.

Speaker Change: My questions.

Speaker Change: For the first one I'm wondering whether you could provide your outlook on bitcoin mining economics over the near to medium term.

Speaker Change: And this quarter Galaxy achieved a marginal cost of mine as mentioned.

Speaker Change: Less than $23000 for bitcoin, which is not only attractive, but yes, the lowest we've seen thus far.

Chris Ferraro: And maybe you can draw some parallels or contrast to the margin profiles in the HPC verticals that Galaxy is considering here. Yeah, so, let me give it an attempt. I think we have a perspective, and I think this is generally held, that the hash rate is likely to increase over the near term. And that is largely because there have been backlogs of both older machines that have been on the sidelines for a long time, as well as new production of new and more efficient machines from the ASIC manufacturers that are in the channel and that are making their way into the market. There is still a reasonable dearth of good, reliable data center capacity to house all that.

Speaker Change: And maybe you can draw some parallels or contrast to the margin profiles.

Speaker Change: In the HTC verticals that are that galaxies considering here.

Speaker Change: Yeah.

Christopher Ferraro: Yeah, so let me give it an attempt at this. I think we have a perspective, and I think this is generally held, that hash rate is likely to increase over the near-term. And that is largely because there have been backlogs of both older machines that have been on the sidelines for a long time, as well as new production of newer, more efficient machines from the ASIC manufacturers that are in the channel and that are making their way into the market. There is still reasonable dearth of good, reliable data center capacity to house all that. And so I would temper it a little bit, but our expectation is that hash rate over the near-term is going to go up.

Speaker Change: So.

Speaker Change: Yes, let me give let me give it a attempt to this I think the we have a perspective and I think this is generally held.

Speaker Change: That hash rate is likely to increase over the near term.

Speaker Change: And that is largely because there are there have been there had been backlogs are both older.

Speaker Change: Older machines.

Speaker Change: That had been on the sidelines for a long time as well as new production of newer more efficient machines from the ASIC manufacturers.

Speaker Change: That are in the channel and that are making their way into into the market.

Speaker Change: There is still.

Speaker Change: Reasonable a dearth of good reliable data.

Speaker Change: Data center capacity to house, all of that and so I.

Chris Ferraro: And so I would temper it a little bit, but our expectation is that hash rate, over the near term, is going to go up. And so, you know, absent price going up, which I'll leave to Mike to predict, all else being equal, hash rate going up, it's going to impact all miners. Our, for our business, and I think we've started to prove it, which is the most important part, rather than me just saying it in Q2 is a good example of where we sit and our strategy, our power management strategy, and our flexibility of our asset is such that we can make small changes in our decisions of when to produce and when not to produce, that can have a big impact positively on the, ultimately, bottom line.

Speaker Change: I would temper it a little bit, but our expectation is that hash rate over the near term is going to go up and so you know.

Christopher Ferraro: And so, you know, absent price going up, which I'll leave to Mike to predict, the all is being equal, hash rate going up, it's going to impact all minors. Our, for our business, and I think we've started to prove it, which is the most important part, than me just saying it in Q2 is a good example of where we sit and our strategy, our power and the flexibility of our asset is such that we can make small changes in our decisions of when to produce and when not that can have a big impact positively, not ultimately bottom line.

Chris Ferraro: And so our positioning to be able to manage through a flatter, declining price environment while the hash rate, near term, is going up, we think is a real competitive advantage and a real motor around the way we operate our business, and we tend to operate it profitably month over month over month over month going forward. Now, there is a bigger macro dynamic, which is hard to predict, which we haven't factored in yet.

Christopher Ferraro: And so our positioning to be able to manage through a flatter declining price environment, while hash rate near-term is going up, we think is a real competitive advantage and a real mode around the way we operate our business, and we tend to operate it profitably, month over month over month over month, going forward.

Chris Ferraro: But I do think over the longer run is going to, we think is going to have a big impact, which is, and you let you alluded to this, that the value per megawatt of infrastructure that's installed now looking like it's, you know, and I'll directionally make up a number, but in order of magnitude larger per unit of megawatt in other computing environments, like AIHPC versus Bitcoin mining, suggest that hashrate may not perform you know, not perform the way everyone thinks over the medium to longer term, because the economics suggest that electrical capacity will be diverted towards other uses, which would put it, which could put a ceiling on hashrate and actually could be beneficial to Bitcoin miners over the medium to longer term.

Christopher Ferraro: Now, there is a bigger macro dynamic, which is hard to predict, which we're not factoring yet, but I do think over the longer run is going to, we think, is going to have a big impact, which is, and you alluded to this, the value per megawatt of infrastructure that's installed. Now, looking like it's, I'll directly make up a normal, but in order of magnitude larger per unit of megawatt in other computing environments, like AI, HPC versus Bitcoin mining, suggest that Hashtray may not perform the way everyone thinks over the meeting in the longer term because the economics suggests that electoral capacity will be diverted towards other uses, which could put a ceiling on Hashtray and actually could be beneficial to Bitcoin miners over the meeting in the longer term.

Speaker Change: To this the value per megawatt of infrastructure that's installed now looking like it's.

Speaker Change: I'll I'll directionally make up a number but in order of magnitude larger.

Speaker Change: On a per unit of megawatt in other computing environments like AI H P C versus bitcoin mining.

Speaker Change: Suggest that.

Speaker Change: Hash rate may not.

Speaker Change: Not perform.

Speaker Change: No not performed the way everyone thinks over the medium to longer term because the economics suggest that electrical capacity will be diverted towards other uses which would put it which could put a ceiling on hatch rate and actually could be beneficial to bitcoin monitors.

Speaker Change: Over the medium to longer term and so we're looking at that dynamic right. We're obviously at play in that whole dynamic as well, it's gonna be a factor in what we decided to do but I do think you have to zoom out a little bit and and look at those dynamics and think about.

Chris Ferraro: And so we're looking at that dynamic, right, we're obviously at play in that dynamic as well, and it's going to be a factor in what we decide to do. But I do think you have to zoom out a little bit and look at those dynamics and think about what that means for the economics of Bitcoin mining specifically going forward. And so I think within that, I hit a lot of what you were trying to get to, the replacement cost for other compute now appears to be significantly, significantly higher per unit than Bitcoin mining.

Christopher Ferraro: And so we're looking at that dynamic, right? We're obviously at play in that old dynamic as well. There's going to be a factor in what we decide to do, but I do think you have to zoom out a little bit and look at those dynamics and think about what that means for the economics of Bitcoin mining specifically going forward. And so I think within that, I hit a lot of what you were trying to get to; the replacement, the opportunity cost for other compute now appears to be significantly, significantly higher per unit than Bitcoin mining, and I think that's going to have a related impact for what Bitcoin miners decide to do, which is going to have then have a dashed impact on Hashtray too.

Speaker Change: What that means for the economics of bitcoin mining specifically going forward.

Speaker Change: I think within that I hit a lot of what you were trying to get to the replacement the opportunity cost for other compute now appears to be significantly significantly higher per unit than bitcoin mining and I think that's going to have like a related impact for what they are quite minor decided to do which is going to have then have a downstream impact on pass rate too.

Chris Ferraro: And I think that's going to have a related impact on what Bitcoin miners decide to do, which is going to then have a downstream impact on hashrate, too. I really appreciate the color there.

Bill Papanastasiou: Awesome. I really appreciate the color there.

Michael Novogratz: Shifting gears to the final question, I want to ask one that's kind of a bigger picture. So, understanding that Galaxy has built a solid institutional-focused digital asset business. Mike has previously mentioned that one of the next stages of evolution will be for the firm to have a higher on-chain presence. Mike, perhaps you can speak to some of the infrastructure gaps that need to be solved before we teleport to this new galaxy, for lack of better terms.

Speaker Change: Awesome I really appreciate the color there.

Michael Novogratz: Shifting gears to the final question, I want to ask one that's a bigger picture. So understanding that Galaxy has built a solid institutional focus digital asset business might have previously mentioned that one of the next stages of evolution will be for the firm to have a higher on-chain presence. Mike, perhaps you can speak to some of the infrastructure gaps that need to be solved before we teleport to this new galaxy for black and better terms. Thank you.

Speaker Change: Shifting gears to the final question I want to ask one that's kind of more bigger picture.

Speaker Change: So understanding that galaxy has built a solid institutional brokers visualize that business, Mike as previously mentioned that one of the next stages of evolution will be for the firm to have a higher onshore presence.

Speaker Change: Mike, perhaps you can speak to some of the infrastructure gaps that need to be solved before we teleport to this new galaxy for lack of better terms. Thank you.

Michael Novogratz: We are actually there now. We've got a great on-chain lending team. We've got an on-chain over, we're providing validator service for lots of different protocols. We've got an on-chain trading team, and so stay tuned. But we've hired the teams, we're participating in the markets, we're building our confidence and could have been more excited. Pretty sure it was a while to get there, and the label was part of our DNA, right? We were very cautious about making sure we weren't going to violate KYC, you know, know your customer and anti-money laundering levels. Like when you're trading in pools, how do you make sure they're co-cleaned pools? And now we've gotten comfortable, and we're, you know, the gas pedal is fully pressed.

Michael Novogratz: Thank you. We are actually there now. We've got a great on-chain lending team. We've got an on-chain over, we're providing a validator service for lots of different protocols. We've got an on-chain trading team. And so stay tuned, but we've hired the teams, we're participating in the markets, and we're building our confidence. And could it be more exciting?

Mike: We are actually there now we've got a great entre and lending team, we've got a unchain over we're providing validate our service for lots of different protocols, they've got an entre and trading team and so stay.

Speaker Change: Stay tuned, but we've hired the teams were participating in the markets we're building our confidence.

Speaker Change: And I couldn't be more excited.

Michael Novogratz: It took us a while to get there. And literally, the delay was part of our DNA, right? We were very, The gas pedal is fully pressed.

Michael Novogratz: I also think, in addition to the regulatory side, security is a pretty big component of it, and all the protocols and everything on chain, you know, they're all still very nascent. And so, as time goes on, more and more, like time shows whether there are security gaps or not in any given protocol, security audits happen, and it happened on top of each other and continue to approve which protocols and which on-chain venues have gaps or don't have gaps. And so, you know, from our perspective, seeing that develop is critical to us deciding whether we would put any capital at risk, let alone open up windows to allow clients to put capital at risk.

Michael Novogratz: I also think... In addition to the regulatory side, security is a pretty big component of it; all the protocols and everything on chain, you know, they're all still very nascent. And so, as time goes on, more and more like time, time shows whether there are security gaps or not in any one given protocol. Security audits happen and happen on top of each other and continue to prove which protocols and which on-chain venues have gaps or don't have gaps.

Michael Novogratz: And so, you know, from our perspective, seeing that develop is critical to us deciding whether we would put any capital risk, let alone open up windows to allow clients to put capital risk. And so time is actually a necessary component to solving the adoption curve on on-chain activity, I think, writ large broadly for the marketplace.

Michael Novogratz: And so, time is actually a necessary component to solving the adoption curve on-chain activity, I think, writ large broadly from our...

Operator: Participants.

Operator: Thank you.

Michael Novogratz: And with no further questions in the queue, I will turn the program back over to Mike Novogratz for any additional or closing remarks.

Michael Novogratz: Thank you. And, with no further questions in the queue, I will turn the program back over to Mike Novogratz for any additional or closing remarks. Yeah, guys, I think I was relatively clear, bullish on the industry and for Galaxy. I really appreciate your time. I look forward to getting back to you in a few months. Take care. (inaudible) & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & &

Speaker Change: I will turn the program back over to Mike Novogratz for any additional or closing remarks.

Michael Novogratz: Yeah, I think I was relatively clear bullish for the industry and for Galaxy.

Speaker Change: Yeah.

Speaker Change: I think I was relatively clear bullish.

Mike Novogratz: For the industry and for Galaxy really appreciate your time look forward to getting back to you in a few months take care.

Operator: I really appreciate your time. Look forward to getting back to you in a few months. Take care.

Operator: And this concludes today's conference. We thank you for your participation. You may now disconnect. Thank you.

Speaker Change: This concludes today's conference we thank you for your participation you may now disconnect.

Speaker Change:

Mike Novogratz: Goodbye.

Mike Novogratz: [music].

Mike Novogratz: Hum.

Mike Novogratz: Mhm.

Mike Novogratz: Hmm.

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Mike Novogratz: [music].

Mike Novogratz: Uh-huh.

Mike Novogratz: [music].

Mike Novogratz: Mhm.

Mike Novogratz: [music].

Mike Novogratz: Hum.

Mike Novogratz: Oh.

Mike Novogratz: Mhm.

Mike Novogratz: [music].

Mike Novogratz: [music].

Mike Novogratz: Yeah.