Key Takeaways
- • Galaxy Digital is raising at least $250 million for a dedicated credit fund to provide US dollar loans to cryptocurrency companies, with first-round fundraising expected to close in March 2019.
- • The fund will accept cryptocurrency assets, physical properties, and mining equipment as collateral, expanding Galaxy's existing balance-sheet lending operations into a third-party asset management vehicle.
- • Galaxy Digital Ventures previously led a $52.5 million fundraise for crypto lending startup BlockFi, demonstrating the firm's existing exposure to the crypto credit market ahead of this larger fund launch.
- • Demand for crypto lending has surged as the market downturn—with bitcoin down over 80% since 2018—has strained mining operations and reduced funding availability for startups holding depreciated digital asset reserves.
- • The fund will operate under Galaxy Digital's asset management arm, separating this lending business from the firm's proprietary balance-sheet lending operations and positioning it as a discrete investment vehicle for external capital.
Summary
Galaxy Digital, the cryptocurrency-focused financial services firm founded by former Goldman Sachs partner Michael Novogratz, is launching a dedicated $250 million credit fund to address escalating demand for dollar-denominated loans from cryptocurrency companies. The fund represents an expansion of Galaxy's existing lending operations, which have historically been funded from the firm's own balance sheet. According to sources familiar with the initiative, Galaxy intends to close the first fundraising round in March 2019, with the fund to be managed through Galaxy Digital's asset management division.
The credit facility will target cryptocurrency companies seeking liquidity and will accept a diverse range of collateral, including cryptocurrency holdings, real property, and cryptocurrency mining equipment. This collateral structure reflects the composition of assets held by Galaxy's primary borrower base—crypto miners and digital asset firms that have been severely impacted by the 2018 market downturn. Bitcoin's 80% decline from its 2017 peak has created acute profitability pressures for mining operations dependent on elevated token prices and has left numerous startups unable to service debt or fund operations with depreciated digital asset holdings.
Galaxy's move into third-party credit fund management builds on the firm's existing track record in the space. In 2018, Galaxy Digital Ventures led a $52.5 million fundraising round for BlockFi, a New York-based cryptocurrency lending startup, signaling institutional conviction in the emerging crypto credit market. The new fund formalizes and scales this strategy by pooling external capital rather than relying solely on Galaxy's balance sheet capacity.
The initiative arrives at a critical juncture for the cryptocurrency industry. As the bear market has intensified funding constraints and reduced the value of digital asset collateral, borrowing demand from crypto firms has accelerated. Lenders to the sector are simultaneously experiencing a surge in inquiry volume, indicating both elevated financial stress among borrowers and growing recognition that structured credit instruments provide a necessary financing mechanism for firms lacking access to traditional banking channels.
The credit facility will target cryptocurrency companies seeking liquidity and will accept a diverse range of collateral, including cryptocurrency holdings, real property, and cryptocurrency mining equipment. This collateral structure reflects the composition of assets held by Galaxy's primary borrower base—crypto miners and digital asset firms that have been severely impacted by the 2018 market downturn. Bitcoin's 80% decline from its 2017 peak has created acute profitability pressures for mining operations dependent on elevated token prices and has left numerous startups unable to service debt or fund operations with depreciated digital asset holdings.
Galaxy's move into third-party credit fund management builds on the firm's existing track record in the space. In 2018, Galaxy Digital Ventures led a $52.5 million fundraising round for BlockFi, a New York-based cryptocurrency lending startup, signaling institutional conviction in the emerging crypto credit market. The new fund formalizes and scales this strategy by pooling external capital rather than relying solely on Galaxy's balance sheet capacity.
The initiative arrives at a critical juncture for the cryptocurrency industry. As the bear market has intensified funding constraints and reduced the value of digital asset collateral, borrowing demand from crypto firms has accelerated. Lenders to the sector are simultaneously experiencing a surge in inquiry volume, indicating both elevated financial stress among borrowers and growing recognition that structured credit instruments provide a necessary financing mechanism for firms lacking access to traditional banking channels.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.