Galaxy Digital Offers Crypto Firms Loans as a Money-Maker, Others Still Feeling the Bear Market Gravity
Galaxy Digital, the firm founded by the recognized Hedge Fund Manager Michael Novogratz, is currently offering loan-offerings to crypto firms as a money-maker. This is not the first company that moves away from its core business after a bear market that affected the whole crypto market.
Galaxy Digital Expands Offering Loans To Crypto Firms
According to a recent report released by The Block, the firm could be ahead of other market participants. The debts that the firm offers are similar to a “right to equity.” As the firm shows in its Q3 report, they generate an income of 2% of $16 million for the services provided. Additionally, Galaxy Digital receives 2.2 million free shares in the borrower's company.
Thus, the company can purchase millions of shares in the company at a price of around $3.4. Nonetheless, there is no expiration date. The company is Hut8, but these are just assumptions.
Another deal is related to a special purpose vehicle (SPV) to buy and house crypto-backed loans. The lender is a firm that offers US dollar loans to cryptocurrency asset owners that want to collateralize the loan with virtual currencies. One of these companies can be BlockFi, which is also part of Galaxy Digital’s portfolio.
As per the report, the firm owns 90% of the SPV that could be valued at $50 million and that will be purchasing BlockFi’s loans.
According to The Block, the fund could work since it is focusing on crypto business lending. With this new fund, the firm reduces the loan-risk on its central balance sheet.
An analyst that has information about the fund told The Block:
“Galaxy might be able to price more aggressively because of the size of loans they can underwrite. The smaller end is getting very competitive… Defi will eat up the lower end of the borrowing market.”
Moreover, new cryptocurrency firms that are facing banking restrictions could start operating by relying on Galaxy’s fund. Even though, firms will have to take into account that they will need large amounts of equity.