Galaxy Digital Holdings

Mike Novogratz calls Helios a ‘transformative acquisition’ for Galaxy

The Galaxy CEO seems unfazed by the carnage in the BTC mining sector this year, and outlined that the firm is looking to significantly ramp up its mining initiatives.

Galaxy Digital Holdings CEO Mike Novogratz has called the Helios mining deal a “transformative acquisition” for the firm as it works to increase its exposure to the Bitcoin mining sector.

The crypto investment firm’s $65 million acquisition of Argo Blockchain’s flagship mining facility was announced on Dec. 28 as part of Argo’s drastic action to stave off bankruptcy.

Tweeting about the deal on Dec. 29, Novogratz emphasized that Galaxy is a “strong believer” in the long-term future of Bitcoin (BTC) and the company will continue to ramp up its mining initiatives:

“Bear markets are for building. We’re long-term believers in BTC and expect the lowest-cost miners to win over time. Helios is a transformative acquisition that will expand our mining capabilities and services as we continue to build for the decentralized future.”

Explaining the deal in further detail, the Galaxy CEO outlined that the firm has a specific “thesis” on how to approach the mining sector:“low-cost electricity, a very efficient team” and “buying ASIC miners cheap.”

“That’s a recipe for success in mining, even when the hash rate rises,” he said.

Recent data from Hashrate Index found that Bitcoin ASIC miner prices are hovering at lows not seen since at least 2021, with the most efficient ASIC miners seeing their prices fall 86.8% from their peak in May 2021.

Galaxy has five business lines across trading, asset management, crypto mining, venture investments and investment banking. According to its website, it currently has $1.9 billion worth of assets under management.

As it stands, Galaxy has mainly utilized hosting services for its mining operations. However, Novogratz notes that owning 200 megawatt (MW) capacity Helios will not only let the company run miners on its own site but host for others as well.

Helios potentially has a lot of scaling ability to make it one of the biggest miners on the market. Argo Blockchain previously outlined in May this year that it had plans to increase electrical capacity to 800MW in “the coming years.”

At the time, the firm also said it expected Helios to reach a BTC mining capacity of 5.5 exahashes per second by the end of the year, with the potential to eventually hit 20 EH/s.

It appears that Galaxy has some cash to splash amid the 2022 bear market, considering that it also gave Argo Blockchain a $35 million equipment finance loan alongside the acquisition.

Related: BTC price preserves $16.5K, but funding rates raise risk of new Bitcoin lows

The move also adds another coup from earlier this month, when Galaxy snapped up crypto self-custody platform GK8 for an undisclosed fee.

GK8 was being auctioned off as part of the Celsius bankruptcy process, after the defunct crypto lender snapped up the firm for $115 million in 2021.

Novogratz called the acquisition a “crucial cornerstone in our effort to create a truly full-service financial platform for digital assets.”

Novogratz’s Galaxy Digital to acquire Celsius’ GK8 in bankruptcy garage sale

The self-custody platform was acquired by Celsius in 2021 for $115 million and is now set to change hands, pending approvals.

Mike Novogratz-led investment firm Galaxy Digital Holdings has won the bidding to buy GK8, an institutional digital asset self-custody platform owned by Celsius Network — pending court approvals and certain closing conditions.

According to a Dec. 2 blog post from GK8 and a press release from Galaxy, if the acquisition goes ahead, Galaxy will acquire the platform’s nearly 40-strong team as part of the deal including cryptographers and blockchain engineers and an office in Tel Aviv.

GK8 is a self-custody platform for managing blockchain-based assets which offers custody, staking, decentralized finance (DeFi), nonfungible token (NFT) support, tokenization and trading.

The team behind the platform claims it can run secure blockchain transactions without being connected to the internet, severely reducing the risks of hacks.

Celsius acquired GK8 in 2021 for $115 million, though Galaxy has not disclosed how much it offered during the bidding process. 

Mike Novogratz, founder and CEO of Galaxy called the acquisition a “crucial cornerstone in our effort to create a truly full-service financial platform for digital assets.”

“Adding GK8 to our prime offering at this pivotal moment for our industry also highlights our continued willingness to take advantage of strategic opportunities to grow Galaxy in a sustainable manner,” he added.

Galaxy intends to support GK8’s ongoing operations while utilizing its technology to develop its trading platform GalaxyOne it said.

GK8 founders, including CEO Lior Lamesh and chief technology officer Shahar Shamai, are expected to stay with the company and lead Galaxy’s new custodial business.

“With the backing of Galaxy, we aim to introduce new and exciting offerings to the industry that showcase a combination of Galaxy’s best-in-class services and GK8’s cryptography, security, and unparalleled R&D skills,” Lamesh said.

Related: Mike Novogratz: Bankman-Fried is ‘delusional’ and headed to jail

Celsius has been undergoing bankruptcy proceedings since filing for Chapter 11 bankruptcy protection on Jul. 13, discussing plans to sell some of its assets.

In the court filing, Celsius CEO Alex Mashinsky indicated the company could sell Bitcoin (BTC) mined by its mining operation to help repay at least one of its loans and provide revenue for the company in the future.

While in a Sept. 15 filing with the United States Bankruptcy Court for the Southern District of New York, Celsius asked for permission to sell its stablecoin holdings.

Galaxy Digital was recently named in a $100 million lawsuit by institutional crypto custodian service and wallet operator BitGo for dropping its plans to acquire the firm. 

Galaxy terminated the May 2021 agreement to acquire the firm on Aug. 15, 2022, citing a breach of contract by BitGo when it allegedly failed to deliver audited financial statements by July 31, 2022. 

BitGo then revealed in Sept. 13 post that it was seeking more than $100 million in damages, accusing Galaxy of “improper repudiation” and “intentional breach” of its acquisition agreement with BitGo.

Is the bottom in? Raoul Pal, Scaramucci load up, Novogratz and Hayes weigh in

Some high-profile investors have taken the recent market downturn as an opportunity to add to their crypto positions, though others warn there’s still a risk of worse to come.

Some of the highest-profile investors in crypto believe that a crypto market bottom is fast approaching and the timing is right to buy — although one still warns of catastrophic outcomes should prices fall below established support levels. 

Billionaire Mike Novogratz, founder, chairman and CEO of digital asset merchant bank Galaxy Digital Holdings, told a Morgan Stanley conference on Monday that cryptocurrencies may be close to a bottom, with Ether (ETH) likely to hold at $1,000 and Bitcoin (BTC) at around $20,000 to $21,000.

The bottom for crypto would be realized faster than that of United States stocks, which could fall a further 15% to 20%, he said:

“Ethereum should hold around $1,000 and it’s $1,200 right now. Bitcoin is around $20,000, $21,000 and it is $23,000, so you are much closer to the bottom in crypto than you are where I think, stocks, are going to have another 15% to 20% decline.”

Hayes warns of sell-off risk

Arthur Hayes, co-founder and former chief of BitMEX, took a similar view, acknowledging on Twitter on Monday that on-chain data for wrapped Bitcoin (wBTC) and Ether indicated that “liquidations have mostly happened.”

However, Hayes warned that should support levels break for BTC and ETH at $20,000 and $1,000, respectively, we could expect “massive sell pressure in spot markets.”

Pal, Scaramucci loading up 

Macro investor Raoul Pal is taking the recent market downturn as an opportunity to add to his crypto positions. On Tuesday, Pal told his 956,000 Twitter followers that “we are in a buy zone” for Bitcoin, adding he was getting ready to “significantly” add to his crypto positions “probably starting next week and into July.” 

The former Goldman Sachs executive explained that the imminent Bitcoin bottom can also be signaled by the weekly Relative Strength Index (RSI), which is at 31, edging closer to its lowest ever at 28. 

RSI is a metric used by investors to measure the speed and magnitude of price changes, which can indicate overbought or oversold conditions. According to Investopedia, an RSI reading of 30 or below indicates an oversold and undervalued condition.

Pal said his framework frequently expects 60% drawdowns over the long-term time horizons, adding:

“In fact, the best way to optimize returns is to add significantly when the market tests the key trend.”

Anthony Scaramucci, founder of Skybridge Capital, told CNBC’s Squawk Box on Monday that investors should “stay disciplined” amid the crypto slump, noting that his fund has continued adding Bitcoin and Ether into its portfolio.

“With incremental cash coming into our fund we have bought more Bitcoin and Ethereum […] So yes, truth be told, people will look back on this debacle and say I wish I had fresh cash to buy into that.”

Related: ‘Too early’ to say Bitcoin price has reclaimed key bear market support — Analysis

Novogratz was less gung-ho about investing right now, taking a more conservative approach and telling attendees that it may not yet be time to “deploy lots of capital,” as the economy may have further to fall. 

“Until I see the Fed flinch, until I really think, OK the economy is so bad, and the Fed is going to have to stop hiking and even think about cutting, I don’t think it is time to really deploy lots of capital.”

Other metrics that could shed light on whether crypto is nearing its market bottom is the Fear and Greed Index, which as of June 15, is currently sitting at eight, under “Extreme Fear,” which was last seen on May 17, around the time of Terra’s collapse.

Bitcoin is currently priced at $22,061 and ETH is at $1,215 at the time of writing.