Key Takeaways
- • Galaxy Digital is raising at least $250 million for a dedicated credit fund to provide US dollar loans to cryptocurrency companies, with a first-round close targeted for March 2019.
- • The fund will accept cryptocurrency assets, real estate, and mining equipment as collateral, addressing growing demand from crypto firms seeking capital as the market faces headwinds.
- • Galaxy Digital founder Michael Novogratz is leveraging the firm's existing lending experience—built on its own balance sheet and venture investments like the $52.5 million BlockFi fundraise—to formalize and scale credit operations through an institutional fund structure.
- • The timing reflects acute market stress: bitcoin has declined over 80% since 2018, pressuring crypto miners and startups that raised funding in digital assets and face difficulty accessing additional capital as holdings lose value.
- • The credit fund will operate under Galaxy Digital's asset management arm, separating the institutional lending vehicle from the firm's existing venture capital and proprietary trading operations.
Summary
Galaxy Digital, the cryptocurrency-focused financial services firm founded by former Goldman Sachs partner Michael Novogratz, is launching a dedicated credit fund with a minimum $250 million target to capitalize on rising demand from crypto companies seeking traditional financing. According to sources familiar with the matter, Galaxy plans to close the fund's first fundraising round in March 2019, structuring the vehicle under its asset management division.
The fund represents a formalization of lending activities Galaxy has already conducted using its own balance sheet. The firm will extend US dollar loans to cryptocurrency businesses while accepting digital assets, real estate, and cryptocurrency mining equipment as collateral. This approach allows Galaxy to diversify risk across borrower types while capturing value from the full spectrum of crypto industry participants, from early-stage startups to established mining operations.
Galaxy's track record in crypto lending and venture investing provides a foundation for this institutional fund. The firm has previously backed crypto lending startups through Galaxy Digital Ventures, most notably leading a $52.5 million fundraise for BlockFi, a New York-based crypto lending platform, in 2018. This prior experience demonstrates both the firm's conviction in crypto credit markets and its ability to identify and support viable lending businesses.
The timing of the fund launch underscores structural stress in cryptocurrency markets. Bitcoin has declined more than 80% since 2018, creating acute capital constraints across the industry. Crypto miners—whose profitability depends on sustained asset prices—face particular pressure, with lower prices eroding margins and threatening customer retention. Additionally, startups that raised capital through token offerings during the 2017-2018 bull market are struggling to secure follow-on funding, and the collapse in cryptocurrency valuations has destroyed the value of previously raised capital, creating urgent liquidity needs.
By formalizing a dedicated credit fund, Galaxy Digital positions itself to capture outsized demand from a capital-starved sector while generating yield-based returns distinct from its venture and trading operations. The structure signals confidence that institutional capital will enter crypto lending, even as near-term market conditions remain challenged.
The fund represents a formalization of lending activities Galaxy has already conducted using its own balance sheet. The firm will extend US dollar loans to cryptocurrency businesses while accepting digital assets, real estate, and cryptocurrency mining equipment as collateral. This approach allows Galaxy to diversify risk across borrower types while capturing value from the full spectrum of crypto industry participants, from early-stage startups to established mining operations.
Galaxy's track record in crypto lending and venture investing provides a foundation for this institutional fund. The firm has previously backed crypto lending startups through Galaxy Digital Ventures, most notably leading a $52.5 million fundraise for BlockFi, a New York-based crypto lending platform, in 2018. This prior experience demonstrates both the firm's conviction in crypto credit markets and its ability to identify and support viable lending businesses.
The timing of the fund launch underscores structural stress in cryptocurrency markets. Bitcoin has declined more than 80% since 2018, creating acute capital constraints across the industry. Crypto miners—whose profitability depends on sustained asset prices—face particular pressure, with lower prices eroding margins and threatening customer retention. Additionally, startups that raised capital through token offerings during the 2017-2018 bull market are struggling to secure follow-on funding, and the collapse in cryptocurrency valuations has destroyed the value of previously raised capital, creating urgent liquidity needs.
By formalizing a dedicated credit fund, Galaxy Digital positions itself to capture outsized demand from a capital-starved sector while generating yield-based returns distinct from its venture and trading operations. The structure signals confidence that institutional capital will enter crypto lending, even as near-term market conditions remain challenged.
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