Galaxy Digital Inc. (GLXY) Earnings Call Transcript & Summary

Good morning, and welcome to today's Galaxy Digital Conference Call. Today's call is being recorded. [Operator Instructions] Webcast participants could submit a question online directly through the webcast. [Operator Instructions] At this time, I'd like to turn the conference over to the Investor Relations team. Please go ahead.

Good morning, and welcome to Galaxy Digital Shareholder Update Conference Call. We're joined today by our Founder and CEO, Mike Novogratz; President, Chris Ferraro; and Chief Financial Officer, Ash Prithipaul. Before we begin, please note that our remarks today may include forward-looking statements. Actual results may differ materially from those indicated or implied by our forward-looking statements as a result of various factors, including those identified in our filings with the Canadian securities regulatory authorities on SEDAR and available on our website. Forward-looking statements speak only as of today and will not be updated. In addition, none of the information on this call constitutes a recommendation, solicitation or offer by Galaxy Digital or its affiliates to buy or sell any securities, including Galaxy Digital securities. And with that, I'll now turn it over to Mike Novogratz.

Good morning, everyone. It was just 6 weeks ago that we did the last of these calls the way our earnings work. And at that point, I highlighted that we were kind of entering a new era that my optimism for the opportunity set that we saw had gone limit up relative to where it had been even 4 months before. That was mostly based on corona and the dramatic response, central banks and ministries of finance around the world have had, flooding the world with liquidity, creating a powerful, powerful macro narrative of why scarce assets like bitcoin will be more and more important in people's portfolios and why the digitalization of the world is going to accelerate. Stablecoins, hence, are growing by leaps and bounds. And so the whole infrastructure play that we've constantly focused on here, just more optimistic about that. And I would tell you, in those 6 weeks, that enthusiasm has only grown. We've seen hallmark trades like Paul Tudor Jones buying bitcoin in a hedge fund. There have been plenty of hedge fund managers that had dabbled in it, but no one had publicly bought it in their fund in a big macro way. That adds credibility to the space, but it also opens up the whole hedge fund universe to be able to think of bitcoin specifically in this case as a macroeconomic tool. And so I'm sitting here today, thinking our business hasn't been stronger in literally since we started. You could talk about the when we started right before the market really started to flip. But we've started this thing as the idea that we were going to tap into the institutional adoption of crypto and bitcoin and blockchain. And to date, it's been mostly a retail business. And some of our portfolio investments have done great if they were in that retail side, in that platform side, but institutions have been slow coming. And you've been on these calls. And sometimes I sound like a broken record, they're coming, they're coming. Well, we finally are seeing it. The Tudor Investment Corp. being one of the first hedges. We've seen other hedge funds since -- participate. They just haven't made themselves public. We are seeing it in asset management with more activity, with people coming to us and us looking at different partnerships for distribution. We're seeing it in our investment banking business with more activity, both people inside the industry where they see a consolidation, but also outside the industry. And I'm seeing it even in the non-bitcoin ecosystems. Block.one, part of the EOS system there, they're going to be launching their voice token in a week, they spent a huge amount of money on it. And when you look at what's happening with Facebook and Twitter and the President, there is a wider opportunity today than there was 6 months ago for a decentralized blockchain-based social media presence. And so I guess my optimism is high. Last time I told you I was frustrated with our stock price. We really try to do a better job of telling our story and marketing our stock. Our stock has rallied a decent bit since. I am still frustrated with our stock price. We trade significantly below book. We have what we think is a growth business in a growth industry. We are starting to hit metrics that will, in time, I think, make you guys and certainly make us feel like this is a growth business. And so there's been really a tectonic shift in momentum and thinking that I want to highlight. We see lots of opportunities. And so we're going to look for ways to find accretive capital for this firm. We are completely well capitalized for the business we're running, but I see big opportunities, both on the balance sheet and in our businesses. And so I'm not sure if that ends up being [ debtor ] converts or partnerships or joint ventures or at one point, once our stock is at an accretive value of equity. But I couldn't be more bullish right now, the opportunity set. Proud of the way our team has handled this crappy corona season. We have been mostly remote and working very efficiently. Chris is going to talk on it. So I'm going to stop there. I'm going to hand it over to Chris Ferraro for kind of business-by-business details. But just want to leave you with our shared sense of my enthusiasm for the opportunity right now. I think bitcoin is going to take out the old -- this $10,000 level, which has been resistance recently. And that opens up a much higher price rates, first $14,000, then $20,000. And I just know how this works, higher prices is going to generate more excitement, more activity and more enthusiasm. And so a lot of my enthusiasm is built on this macro call, but I've got a high conviction on it. And so I'm going to leave it there and pass it to Chris.

Thanks, Mike. A quick note on COVID-19. Obviously, we are all collectively around the world continuing to face the challenges of the pandemic, its impact on the global economy and its very real human cost. As a company, Galaxy Digital continues to prioritize the safety of our people, and we continue to work remotely. While we are heartened by the green shoots and improved prospects of reopening, we also remain sober about the risk going forward in making a full return to normalcy. And so we'll be taking a pragmatic and measured approach to any proposed reopening, allowing team members whose commercial activity benefits from in-person connectivity to come back to the office, travel and so on, under permitted clear guidelines, while allowing all other teams and employees to continue to operate remotely until we have much more clarity on the situation. Remember, we are Galaxy Digital. Relating to the markets. After the liquidity and margin driven declines in March, bitcoin staged a dramatic recovery, up 46% since March 31 and up 31% year-to-date. This compares favorably to almost every other liquid asset class. The S&P was up 17% since March 31, but down 7% in the year. NASDAQ was up 22% since quarter end, but only up 4% in the year. Euronext European stocks up 10% since March 31, but down 18% in the year. Even gold was up 9% since March 31, and only up 12% on the year relative to bitcoin. As Mike previously mentioned, despite with some other Old Guard Wall Street firms may outwardly claim now is they're [ proficient ], we continue to believe that bitcoin thesis as the digital store of value has never been more clear, and that the path forward towards institutional adoption has never been more compelling. To that end, as you all know, we have to date gear Galaxy Digital towards being an institutional service provider and market participant in the cryptocurrency sector. We're pleased to report that April and May have been some of the most active and productive months for us on the business development front across all of our businesses, despite the quarantine and global pandemic. While I cannot talk in detail yet about some of the more impactful initiatives we are pursuing, we do have a full calendar announcement to share ahead in the coming days and weeks, so stay tuned. Outside of bitcoin, 2020 has brought a number of significant tangible examples of cryptocurrency, digital asset objects and distributed ledger technologies beginning to take root in commercial applications and other use cases. Mike mentioned EOS and Block.one and the launch of voice. Stablecoins, for example, have continued to gain adoption with total market cap for the 2 largest coins, Tether and USDC, growing from $4.6 billion at the end of the year to $9.6 billion today, almost doubling, with $5 billion of net incremental digital wealth entering the ecosystem since the beginning of the year. Bakkt, one of our portfolio companies and a subsidiary of the Intercontinental Exchange Group, announced their launch later this year of an ambitious Bakkt Cash app that will allow consumers to store, buy, sell, trade and redeem all their digital assets, cash, bitcoin, rewarding loyalty points, in-game points, et cetera. We've seen the demo and our entire team is excited to become day 1 users. Also, just 2 weeks ago, Reddit, the 19th most visited website in the U.S. and the world, announced that they would begin testing their own on-platform cryptocurrency content reward program. The list goes on. But I think it's important just to highlight that the grand cryptocurrency experiment is far from over. In fact, it's still very much in its infancy. And we believe the opportunity set for Galaxy as a service provider and capital allocator focused on this space is going to continue to expand for years to come. Turning briefly to results, and I'll let Ash go through next in much greater detail. In the first quarter of 2020, Galaxy recorded a comprehensive loss of $27.7 million, reflecting, first, realized and unrealized mark-to-market losses in digital assets of $25 million. And second, gross operating expenses of $15 million. These first 2 components were partially offset by positive realized and unrealized investment gains as well as operating income totaling $12.3 million. As we discussed recently on our Q4 update call, the significant decline in the crypto market and in risk assets more broadly in March were the primary driver of this loss. At the end of the first quarter, we held 10,092 bitcoin when its trading price was approximately $6,400 per coin. However, as I've already pointed out, since March 31, bitcoin and the BGCI have posted increases of 46% and 35%, respectively. And furthermore, we've continued to accumulate additional bitcoin through our business activities, especially that as of May 27, we held 13,338 bitcoin with prices trading around $9,400 per coin. Now let me take a few moments to discuss each of our operating businesses, how they contributed to the quarter and why we're so excited about the remainder of fiscal 2020. In our trading business, the first 3 months of 2020 drove an uptick in market volatility across the board. This led to a strong increase in trading volume in actively trading counterparties, which was continued into April or May. Our franchise trading business grew its counterparty base by 18% quarter-over-quarter and saw a noticeable uptrend in traditional asset managers entering and completing the onboarding process with us. Our trading arm is particularly well positioned for the increased interest we've seen from these traditional players entering the digital asset space. Our team has the experience and background, and more importantly, the audited institutional size balance sheet needed to facilitate trades at a larger scale than the vast majority of our competitors. We believe the trend of traditional asset managers entering the space will continue. We're having new conversations now nearly every day with multibillion-dollar fund managers asking to learn more about bitcoin and discuss how they can responsibly add it to their portfolios. We successfully built the infrastructure to scale our trading business and our priorities during the remainder of 2020 remain the same: completing the migration of counterparties to our eOTC product, giving them electronic access to spot trading automated settlement and research and commentary; extending our eOTC product offering into a full single-dealer platform, giving counterparties access to electronic agency execution, lending, margin financing, derivatives and synthetics; optimizing our own balance sheet through cash lending and basis trading as well as the relaunch of our digital asset lending offering; and finally, scaling up our market making capabilities and alpha-generating strategies in our quantitative trading business. In asset management, as I've articulated now throughout, 2020 has seen increased market demand for bitcoin, and we continue to focus on the Galaxy Bitcoin funds accordingly. Whereas our Galaxy Crypto Index Fund hold the basket of the largest, most liquid cryptocurrency, our bitcoin funds meet the strong current market interest for safe, simple and secure ownership of bitcoin. Our continued conviction in the case for bitcoin has deepened as we observed a whole new class of institutional players entering the space, especially since March. And our regular surveying of the registered investment adviser community, asset management has seen interest in bitcoin lift significantly, with 54% of surveyed advisers in May, "Likely to allocate to bitcoin in the next 12 months compared to only 25% in January, even just considering an allocation." In the immediate here and now, overall demand in Q2 has picked up, with the bitcoin funds realizing net weekly inflows each week in the second quarter thus far. To capitalize on this market momentum, asset management continues to develop the Galaxy Fund Management or GFM brand as the public face of our crypto products. Our targeted 2020 marketing campaign has driven strong initial results. The campaign is increasing brand awareness across institutions and advisers, positively shaping their perception of digital assets and educating them about the role of digital assets in portfolios. Further to this strategy, I'm pleased to announce that Galaxy will be launching, in June, a 6-month cross-channel content program with the Financial Times, to educate the FT's 185,000 financial adviser audience on digital assets and Galaxy's differentiated solutions, allowing us to continue to strengthen our brand positioning as the bridge for traditional wealth advisers in the institutional option of digital assets. In regard against the first quarter, our Galaxy Interactive Venture Capital team who manages the Galaxy EOS VC Fund within the asset management group, continue to take advantage of their expertise and access in the interactive content space. They made 7 new investments and 1 follow-on investment in the first 3 months of the year. The quarantine period of this pandemic is acting as an accelerating factor [ hosting ] trends towards e-commerce, work from home and the interactive online metaverse, and our interactive team is continuing to see some of the best early stage opportunities there are in the space. Overall in asset management, we ended the first quarter with $356 million in AUM, and I'm happy to report that Galaxy Fund Management has now, on an [ inter-month ] basis, cross the $50 million of AUM mark during the month of May, a key early milestone for that team. I'll now proceed to our investment banking business, Galaxy Digital Advisors, which continue to establish itself as the leading strategic advisory firm in the blockchain technology in digital asset sectors. In 2020, we've seen further consecutive quarters of growth in our mandated backlog, and the business has a number of active M&A and financing mandates currently underway. In terms of completed business in the first quarter, Galaxy Digital acted as a strategic adviser to a confidential client in the bitcoin mining space as well as sole placement agent on a Series A capital raise for a consumer lifestyle and leisure brand. Not directly in our core end market, but the kind of innovator in its sector for which Galaxy was a strong fit, and our role there demonstrates the broad expertise of our investment banking team and the multiple areas we have for potential growth in the future. One area of particular focus for Galaxy Digital Advisors is our emerging franchise in bitcoin mining. The sector is capital-intensive and currently undergoing an evolution that is seeing the emergence of large-scale bitcoin mining data center projects with commensurately large and more sophisticated financing needs. Galaxy Digital has firmly established itself -- its domain expertise and is working with a number of clients currently. We expect a lot more to come in the space. Finally, in terms of our balance sheet and principal investments, our team has continued to pursue opportunities across both debt and equity, and our portfolio remains healthy and strong. The team's 5 follow-on investments totaled $14 million in the first quarter and we've begun deep dive industry mapping across adjacent sectors in order to broaden our scope, ensure that we're finding the best companies building towards the future of digitization. With that, I would now like to turn it over to Ash to walk everyone through the specifics of our financial performance for the first quarter. Ash?

Thanks, Chris. I will now provide some additional details regarding our financial results for the quarter. Our comprehensive loss in the 3 months ended March 31 totaled $27.7 million. The current quarter loss was largely a result of realized loss on digital assets and operating expenses. The first quarter 2020 figure includes $1.6 million of equity-based compensation expense, which is a noncash charge and has no net effect on equity. This brings our total equity, or net book value, to $328 million as of March 31, or CAD 1.64 of net book value per share or USD 1.16 of net book value per share. As of March 31, a number of compensatory Class B units and stock options outstanding were 18 million and 14.6 million, respectively. The aggregate compensatory awards have a value of $12.1 million remaining to be amortized over their life. Operating expenses for the 3 months ended March 31 were $15 million, inclusive of equity-based compensation of $1.6 million over the same period. Regarding our balance sheet, $14.2 million of follow-on investments during the first quarter brought the investment balance to $169.6 million. As of March 31, we held 40 individual investment positions, excluding our cryptocurrency and pre-ICO holdings, with no single investment position representing more than 8.9% of our net asset value. We're pleased to report that we had $97 million of liquidity as of quarter-end, inclusive of net digital assets and net of forward commitments and projected future expenses, providing ample liquidity with which to continue to operate the business. With that, I'll now turn the call back to the operator, so we can address questions from our equity analysts and investors. Operator, any questions from our equity analysts?

Yes. We have one question from Deepak Kaushal with Stifel, GMP.

So I've got a couple of questions. First, some housekeeping questions maybe for Chris and Ash and then some bigger picture questions for Mike. Just looking at the trading losses, the realized trading losses in Q1, $37 million. I'm just wondering if you can give us some color on how you traded through the flash crash. So there's $37 million realized loss, $14 million unrealized gain. What were kind of the moving parts there? Can you walk us through that?

Yes, I can. The reality is we didn't trade it wonderfully. The good news is we didn't sell anything at the lows. And after the bounce to kind of reasonable levels, we added some. And so it was kind of P&L up early in the year, right? You forget, we had a big rally in the early part of the first quarter. Kind of, a surprising rally to me. I was perplexed by it. We were long, but we weren't overly long, our index because I didn't understand where the buying was all coming from. It turned out it was tremendous amounts of Asian leverage. As that got washed out, we had a big loss and then as the market bounced back, we've made that money back and then some. And so listen, with better trading, we would have sold a lot on the -- during the break that had happened very fast, and we were slow and didn't react quick enough. And hence, didn't have a ton of powder to buy at the really distressed levels but did add some. And so I think your net of the whole thing is an opportunity lost and exposing ourselves to much more P&L volatility than I would have liked to have, right? You would have rather cut some of your position at $8,000 and bought a lot back at $5,500. And we weren't -- we didn't manage to pull that off. And so call it a neutral. And I know the P&L shows differently because some of those were coins that we were short against longs and you'll take a loss on some and there's unrealized on others. But kind of from where I look at it, the net of the whole thing, over the down, up, down, kind of $8,000, $8,000 is probably neutral.

Okay. That's helpful. And so primarily on your own book of trading, not related to facilitation of client trading?

Yes. I think one of the things to be clear about, and it's something that we very much think and hope will change over time. And one of them, I'm sure the frustrations with you guys as analysts is that our balance sheet is still large, a good portion of it's in coins. And the volatility of that balance sheet still overwhelms the volatility of our earnings in our core businesses. When we started this company and went public 2.5 years ago, the idea was, over time, those businesses would grow and the balance sheet would be less important relative to the business earnings. And it's been a long haul. We haven't grown the businesses fast enough to do that yet. I'm optimistic that we're finally seeing the sunshine. And a year from now, I hope that the P&L of those businesses is stable enough -- listen, banking P&L is stable. It goes one way, it goes up or flat. Asset management P&L is -- goes -- you get assets, you get paid. And so it's constant revenue versus how much you're spending, but that's a pretty stable business. And our customer flow trading business should be a heck of a lot more stable than the proprietary business that I broadly manage. And so we're still -- the volatility of our company still is a little overwhelmed by the big moves to the market. If you're long $13,000 bitcoin, you can do the math on how that moves the P&L. And again, my fault for not having sold a bunch more when it was high and not bottom low, I mean that's what I'm supposed to do. But that's just the reality of where we're at.

Got it. Well, if we could all time the market perfectly, there wouldn't be any opportunities [indiscernible], so I get it. But just on that -- on the operating side, mike, I know you guys have a pretty good discipline on what you expect to burn over the coming year. What are your thoughts on as we exit in the post [ halving ] environment, thoughts on breakeven when you might be able to achieve that in your business based on current outlook and trajectory?

I think because I'm hopeful that the banking business does it this year, you look at the pipeline that they have and the fee opportunity, I have to assume that a bunch of the stuff in the pipeline gets done because it feels like it will. And so I think that business could. And then I think we're probably 12 months away. Chris, you might want to chime in on trading business and the asset management business, the way we have cost allocated?

Yes. There's a couple of things you talked that I want to -- I think I want to articulate here, which is, totally agree with Mike on the advisory business. I also think -- I want to caution you, though, that the growth in the pipeline of that business and the opportunity set for that business is such that we would be making a mistake as we execute on some of the current mandates to not continue to grow the team, to broaden out and really go attack the opportunity set. So I think there's going to be a push/pull between "profitability" and growing the business like all -- most other growth companies. And so we're going to pay close attention to that. But I think for shareholders and for ourselves, limiting the growth of the business by constraining the team is maybe -- would be a mistake. So I think that's one that we'll see -- that we're going to monitor. The trading business, as we articulated before, is a big investment for us, both across the front office team, but much more so in the technology engineering team, the operations team, for our finance team because we're building infrastructure for a market that just didn't exist before. And so that business is going to get there with industry volume and our share capture growth increasing and it's going to get there with going horizontal with additional products and higher-margin trading products. So that's why we've been -- we've referenced derivatives and synthetics and structured products a lot. It's a big focus of ours. We're in that business in earnest in the first quarter. We've continued in the second quarter. And so those -- that combined with the share capture and bringing more customers and more volume on our platform as well as financing -- rolling out the single-dealer platform and financing customer trades that's going to be what gets us there. And our asset management business, the only thing I'll point out is that and explains a little bit of what Mike referenced with our balance sheet, we have asset management fees from the EOS VC Fund and from our Galaxy Funds Management business coming in. We don't accrue internal asset management fees or performance as revenue for our own balance sheet, and yet we have the team managing, as Ash pointed out, over $170 million of capital internally for the company. And so that distorts in my view the "profitability" of the asset management business. We manage significant assets, and that group is profitable. And so anyways, I want to characterize that before you.

Okay. That's helpful. And so a year from now, aside from the principal book and stripping out that internal management piece, what do you expect to be the biggest bucket of [indiscernible] business?

It should be the trading business. Revenue-wise -- maybe not profit-wise, but revenue-wise. That's where the growth has to come. And that -- within the trading business, I think our edge, if you want to think of it that way, is going to be the volatility book, i.e., derivative structured product book, which is always paired with the financing side.

Okay. That's helpful. So a bigger picture question. The halving has come and gone, Libra's come and gone before that, Telegram's kind of come and gone. I guess from a mainstream perception or mine share interest, we have the macro pieces push and pull between inflationary pressures or deflationary pressures, short term, long term. Mike, what's next? Like, I mean, in terms of a big mainstream catalyst like something my taxi driver is going to be asking me about related to bitcoin, is it only an ETF? I mean, what else do you see on the horizon that could create the 2017 environment?

What's interesting is I think it's still hard to buy bitcoin. It just is. JPMorgan and Wells Fargo just recently decided they would bank coin base and Gemini, like the 2 most regulated exchanges are -- well-behaved exchanges in the U.S. When Facebook brought out Calibra, which they renamed after me called Novi, well, they actually didn't rename it after me -- when they brought that out, Facebook, one of the biggest companies in the world, couldn't get banking for Calibra. And so there's been this bias against crypto, and that is melting. It's melting relatively quickly. And so what I think the next 12 months is going to be in bitcoin is easier and easier access points, right? Listen, our fund, we're hoping to get it rated by the big consultants. That hasn't happened before. And we want to sell it through the registered investment adviser channel. That hasn't happened before. I think TD Ameritrade is at one point going to allow their customers to buy direct on their platform. Gemini just did a partnership with Samsung, where now when you get a Samsung phone, you have a Gemini account and you can buy bitcoin direct. So I think you're just going to see easier access, easier on-ramps to bitcoin and the whole crypto universe, especially as stablecoins become a real thing that everybody participates in. Listen, the Libra/Novi project is going to happen and it's probably going to happen this year. That's 2.8 billion people that are going to have a wallet that allows them to use crypto and to buy bitcoin. And so I just think this is a story of adoption, and we're going to see an acceleration of adoption because the macro story isn't going away. The economy might feel better right now because in America, at least, disposable income year-on-year is up, not down, which is a crazy statistic. That's how much money the government is putting in the system. Think about what I just said, disposable income is up, not down. And so we have this bizarre in-between state, where we just keep writing IOUs. At one point, that IOU story is going to -- you're going to see fixed income market yield curve steepen, but that IOU story is going to continue to bubble and then erupt. And so I don't see the macro story, which is supporting this enthusiasm I have, deteriorating. There's no easy fix for it. It's not like, oh, we're buying the highs, and then it's all going to reverse. We're like, how did we make that mistake. I mean this is just math. The amount of borrowing has accelerated and is accelerating. We're going to an election year. And so unless something out of Mars flies down and we have a whole new regime set, I just think this is going to be a growing story. Tell me where I'm wrong?

That's helpful. So no -- so just to play it back, so continued positive macro environment and gradual growing adoption, but no real mainstream catalyst on the horizon?

I don't think we get an ETF this year. I don't. Goldman Sachs put out a paper. What's interesting, listen, Goldman Sachs is a big and diverse firm, right? They've got different divisions and different personalities. The woman who runs -- the CIO of the Wealth Management business who wrote this paper is actually a friend of mine. And I debated her a month ago privately on this thing. Listen, they put out a negative piece on bitcoin, hammering it for a few things. I think it was a 2014 view of bitcoin and crypto, not a 2020 view. And we'll see. I do think you're going to see. I mean, just put yourself in the position. So you've got Tudor Jones, one of the biggest hedge funds. Now let's assume within the next 6 months, 10 other hedge funds start participating in bitcoin. Just make that assumption for a second. You're running Jefferies or Bank of America or Goldman, and you're like, wait a minute, our biggest clients are now starting to trade something and we're not going to participate? That's just not the way the world works. And so once the opportunity set gets big enough, these guys are not going to want to miss it. And I know factually, I have friends in lots of these organizations, there are big debates and fights going on in a lot of these places about how do we get involved in this kind of shift. And there's multiple parts of it, right? There's trading bitcoin and then other cryptos. When we have a dollar-based stablecoin, and part of the FX world is trading there, it's irrational to think that the big FX players aren't going to want to participate. And so I think this is just a matter of time before the bulge bracket firms are participating in digital assets, from bitcoin to other digital cryptos.

Okay. Sort of an institutional FOMO as opposed to a retail FOMO we saw in 2017? Okay. So my last -- go ahead.

It's a FOMO to start, but it just becomes a reality, right? Like as China is moving their currency to a -- they're going to launch this year, they say, right, a crypto renminbi. When the dollar -- when Libra and USDC, as those crypto dollar-backed stablecoins become a bigger and bigger part, it's almost an essential that you're participating.

Okay. So my last question, and I don't want to dominate the call, but hopefully there's more sell-side analysts with questions out there. Telegram pulled their TON token, they had running with the SEC. What are your thoughts on the implication of this to the ecosystem? And the biggest question I get from investors, by far, since you went public is, when do you guys ready to start talking about your business more actively with U.S. investors? So just can you square those two things together and give me a sense of the regulatory environment?

Yes. Listen, so there are 2 different answers. So Telegram -- the SEC made it really clear that they were not going to allow the ICO process the way it used to run to happen, right? Period. You're going to have to be some -- go through some registration process to raise big capital. And they made Telegram the poster child at that. And Telegram thought about doing -- launching the token without the U.S. and realized the strong arm of the U.S. regulatory environment is just too strong to mess with. So they've got an amazing business. Their business is probably worth $15 billion, $20 billion, just as a messaging business if they wanted to sell it to somebody. And so I think they shelved that and went back to doing what they were doing, but very frustrating. I didn't think we needed another blockchain, right? I kind of think Telegram could have been, in some ways, just as easily put bitcoin on their messaging system. I mean, if you think about even what Libra and Calibra are, Libra is a blockchain-based system that's going to have its own cryptos on it. Calibra, the Novi wallet, is the Facebook's interface with it. Did they really need to build another blockchain or could they have used the bitcoin blockchain or the Ethereum blockchain or the EOS blockchain? So in some ways, I'm not positive we needed another blockchain with Telegram, but it's a real frustration because they have 300 million users that would have all been instantly using crypto. I keep telling them or at least sending messages that they should put bitcoin on their messaging system and see how fast that helps the ecosystem grow. And so we'll see. With us, listen, we are registered -- we're a Canadian-listed company. We're based in the U.S. or a Cayman-based company. And we are still under restriction partly because of the makeup of our balance sheet. There's a thing called the '40 Act in the U.S., which doesn't apply in other jurisdictions, which -- even with bitcoin, not seen as a security. We have a big venture part of our balance sheet. And so we're working on that. We certainly understand our stock would trade better if it was -- we were able to market it in the U.S. We haven't given up on the Canadian markets at all. We're going to make a concerted effort to be up there more often and try to tell our story better in Canada. I've seen what happened in cannabis. What dropped [indiscernible] to Canada originally was the Canadian markets took a frontier approach and people made a lot of money, and there was a lot of good liquidity and not just once. It kind of came and went and came and went and came and went in the cannabis sector. And so I'm hoping that the Canadian market kind of reawakens to the opportunity set in digital assets in crypto. And other than that, we're going to continue to work to expand our footprint.

On the latter, I couldn't agree with you more. Seeing what happened to cannabis, you guys have [indiscernible] a lot of those [indiscernible]. So we're hoping the Canadian market reawakens to this as well.

We will now turn it over to online questions.

Great. Well, thank you. We're getting lots of good questions. So thank you to everyone who's submitted. Our first question is, can you talk a little bit more about your -- how your advisory business is developing? Where are you focusing IPOs, follow-on opportunities, M&A? And beyond mining, what sectors are most relevant to your advisory business?

Chris, do you want to take a crack at that?

Yes, I'll take this one. Yes, the -- as I said in the prepared remarks for the call, one of the big sectors we are focused on in the advisory business is the bitcoin mining sector. It's a sector that we've identified early as being right for us in opportunity for a lot of reasons. One, there was a clear catalyst this year, just this month, with the supply issuance halving. And so that just changes the economics of the whole industry. And you've got multi-billions of dollars of capital invested in largely fixed nonremovable assets that needs to get either replaced or retooled for the new economics. And so between net catalyst and real scaled and experienced operators thinking about the economics of bitcoin mining but also using bitcoin mining from an energy and electricity grid perspective to offset times -- off-peak times when capacity is low to generate incremental revenues. Like, there's lots of really cool opportunity and really good ideas going on there, real big players and obvious capital needs for that space. And so our team has been spending a large amount of their time traveling the world, meeting the players coming in and being a part of the conversation. And so there's just -- there's -- whether it's restructuring, M&A, new project financing, both equity and debt financing, there's a number of opportunities that we're in active engagements on. And I think that sector is going to be an obvious one for us -- for recurring repeat business every year. So that's one. The other areas that we're seeing activity in, certainly in M&A, there is a -- we're at a point in some areas in cryptocurrency and blockchain of consolidation. And so there's -- I think if you just look in the news media, they're kind of press release after press release of smaller subscale market participants being merged or being acquired by larger participants. And so that opportunity, for us, having known all the players and having the perspective to either play sell-side or play buy side or put both in some cases as an adviser is sort of what we underwrote and it's what we're seeing right now. And so outside of mining, the areas where we're seeing that is both on the exchange side as well as on the consumer app and information data side.

Our next question is, what's your view of MMT, QE and sustained monetary stimulus? Is there a bright line for your team when debt and budget deficits across Rubicon? Said differently, what odds are you placing on substantial U.S. dollar currency debasement?

Yes. Let me answer that. Because I thought about this thing for years. So MMT, for those on the call that don't follow it is this theory that as long as there's not inflation, you can run as big of a deficit as you want forever. And so let's not be scared about borrowing more and more money because inflation will give us the signal when we have borrowed too much. That's broadly the simplified version what MMT is. And you -- until the world says, oh, no, you're wrong, you can feel very smug that you're right, right? Look at what Japan has borrowed for all these years and they haven't blown up. And so we've just taken our budget deficit from 5%, which was stupidly wide for full economy, full employment GDP growing to now, 20%, 25%. We've only had deficits this high in World War II. And we don't really have a political environment right now that's going to try to stop that, right? We had the Tea Party that came out after 2009, QE and all that kind of craziness where everyone worried that they were going to debase the dollar. And then the Tea Party showed up and stopped spending. We don't have the Tea Party anymore. Donald Trump swallowed the Tea Party and spat them out. And so we've got populism on the left, pre-college for [indiscernible]. And so the worry with MMT is you don't know when the market says enough. There's a thing in economics called the Minsky Moment, which is really where confidence breaks down. You don't know when confidence breaks down. You don't know what the spark that breaks it down is, but you know it's out there, right? Just where -- money doesn't grow on trees. And if you just keep pushing more and more money into the system, at one point, people devalue money. We already have -- there's interesting statistics. If you look at the price drops in the '09 collapse versus this collapse, you could argue this collapse was a lot worse than '09, but prices are a full 2% higher, right? They fell 2% more in '09, and they have fallen so far here, even though the GDP collapse is a lot worse. So the market and people already are sensing, no, no, no, there's going to be more inflation. And so as markets smell inflation, even if there's low growth, then you get stagflation. You have this breakdown of confidence. And again, I don't know where it is. I know we're a hell of a lot closer to that space, so that invisible line of confidence breaking. And you can see this all the time in emerging markets or developing markets when all of a sudden you have the Thai Baht explode or Venezuelan currency explode where -- and if you grew up in Brazil or Argentina, you understood how this happens all the time. It hasn't happened in developed markets for a long time. But we now have developed markets starting to behave like emerging markets in terms of the borrowing. And so why I think this bitcoin story doesn't go away is we're in really dangerous territory. And listen, I might be saying the same thing a year from now or 2 years from now. I'm hoping we don't hit this breakdown in confidence. It will be good for the bitcoin business, but it will be s***** for everything else in America and in Canada. But we're a lot closer that we ever have been. I hope that makes some sense.

Great. Well, it looks like we have time for more question. Mike, you mentioned Paul Tudor Jones and other hedge funds buying bitcoin in the past month. What are you hearing from other hedge funds? Is this a short-term trade or a longer-term view that they're taking?

I think the story I just told, the fear around debasement of currencies and breakdown of confidence is not a short-term thing. It's a medium to long-term hedge to everything else they have in their portfolios. And so while we constantly tell people, put 1% to 2% of your net worth in bitcoin because the probability of s***** things happening is going higher, I think hedge funds are looking at this the same way. Does that mean they will trade it when it rallies up and buy it when it sells up? Of course, not, right? Hedge funds are commercial animals, but most people aren't -- when I ran a macro hedge fund, if I wanted to get bullish to euro, I might get 80% net long the euro of my whole fund. So if I had $1 billion dollar fund, I might be along EUR 800 million. People aren't doing that. And so they really run leverage. They're not doing that in crypto. They're buying 1% to 2%. And so when you buy 1% to 2%, you think of it more like an equity, and you've got much wider stop losses and a much longer horizon than you would, like say, a leverage currency. And so I think there's a real -- that's a significant point that this is more of a medium- to long-term play for most of these hedge funds, partly because of the sizing of it.

Great. Well, Michael, I'll turn it back to you for any closing remarks then.

Guys, I appreciate your time. I'm sure you've done too many Zoom conference calls in the last 3 months. We hope your health is good. We are working our tail off here. We are optimistic. You don't build Rome in a day. And so even though we see the institutions coming, I -- the -- see you guys to kind of hold us accountable 6 to 9 months from now, not 6 days from now because we have a plan we believe in, we see it happening. We see lots of opportunities and couldn't be happier. And so thanks for your time, and have a great day.

Thank you, everybody.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.