Galaxy Digital suffers Q3 losses as crypto bear market continues

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Cryptocurrency merchant bank Galaxy Digital Holdings reported a loss of $76.65 million for the third quarter, as it was weighed down by persistently low digital asset prices over the past year.

“The current quarter loss was largely a result of realized loss on digital assets, unrealized loss on investments, an impairment loss on goodwill and equity based compensation accruals,” the latest report read.

For the first nine months of the year, the company’s losses amounted to $175.68 million.

Galaxy Digital, formed on November 30 last year, has cryptocurrency investments primarily in BTC and ETH, whose prices are down 54.6% and 82.1% respectively since January 9. Adding to difficulties was increased competition in the trading business, which has led to narrower spreads for arbitrage activity, according to the company.

“While we continue to improve and strengthen our trading business, lack of overall trading volume in cryptocurrencies has been a headwind for the business,” the report read.

The trading segment was responsible for $47.47 million of the third-quarter loss. Over the first nine months of 2018, trading losses amounted to $150.74 million.

Total net realized loss on digital assets for the quarter was $38.1 million, with $22.1 million of this coming from ETH, $9.7 million from BTC, and $2.6 million from Ripple. These losses were partially offset by $1.9 million worth of gains from Ethereum Classic.

The previous quarters had smaller net realized losses, partly because of gains from short selling, of $33 million and $21.9 million in the first and second quarters, respectively.

Total assets as of September 30 were $435.50 million, compared to $54.75 million as of December 31, 2017. Total liabilities, on the other hand, were at $48.99 million as of September 30, lower than the $151.40 million as of June 30 and the $53 million as of December 31 of last year.

Galaxy Digital CEO Mike Novogratz, in a Bloomberg interview, expressed optimism that the cryptocurrency market will be picking up soon, saying that come next year, “Q1, Q2, if the institutions start coming in, [cryptocurrencies] will put in new highs.”

The report pointed to increase use of cryptocurrencies and blockchain in recent months, including with Fidelity Investments, which launched its digital assets company last October. Such advances, the company said, “lead to wider adoption of blockchain and cryptocurrencies. This adoption should lead to increased volumes and prices, which should benefit all of our businesses.”

With many cryptocurrency prices down, now is a time to look for underpriced assets in the sector. Calvin Ayre recently said that Bitcoin SV, maintaining the original vision of Bitcoin as a global digital ledger, is “seriously undervalued now, and the token best positioned to grow in value.”