Investment firm Galaxy Digital has been affected by the consequences of the “crypto exchange wars” between FTX and Binance. The former platform entered into a non-binding agreement with Binance to potentially sell its assets except for FTX.US.
The crypto exchanges struck the deal as FTX faced a liquidity crisis; the platform saw a loss of over $6 billion in outflows. The decline in liquidity forced the crypto exchange to halt operations. Binance claims it will absorb its competitor to protect users, mitigate the liquidity crunch, and safeguard the crypto industry. The deal is yet to be completed.
In this context, several companies and users have millions stuck on the crypto exchange, including Galaxy Digital. If FTX cannot resume operations, the Company might record a massive loss.
Surviving The FTX Fallout
According to a report, Galaxy Digital has an investment of $76.8 million in fiat and cryptocurrencies in the crypto exchange. Over half of these funds are currently in “the withdrawal process.” In other words, they are stuck on FTX.
The investment firm didn’t provide more details about the deal between Binance and its competitor. According to a separate report, FTX investors found out about the possible acquisition via social media platforms.
Other high-ranking FTX employees were kept in the dark as well. The deal between the exchange platforms is one of the most important in the industry’s history.
Galaxy Digital recorded a net loss of around $68 million in Q3 2022. In contrast, Q3 2021 was a highly profitable period for the investment firm, with a $517 million gain.
Current losses are attributed to reduced valuations in crypto projects due to “external market conditions,” an increase in operating expenses for the firm’s crypto mining subsidiary. As Bitcoin and other digital assets trend to the downside, miners have difficulty staying afloat.
Mike Novogratz, founder, and CEO of Galaxy Digital sent a positive message to the firm’s investors and the crypto industry during these uncertain times:
While our industry continues to face macroeconomic headwinds and structural evolution, Galaxy remains focused on building for the future state of institutional adoption by taking deliberate steps to transform and simplify our operations. Retaining $1.5 billion in liquidity, including over $1.0 billion in cash, the Company continues to be in a position of strength for both organic and inorganic growth, as we focus on building for the future.
This metric crashed from $2 billion. The firm saw a decline in its partners’ capital. It remains to be seen if the FTX fallout will extend to 2023.