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

I guess we get the generic TMT comm. Here we go. So we're doing a little bit better. Thank you, everybody, for joining us. I have to confess, Mike, I was a little bit apprehensive for most of us, the last time we did an in-person event was exactly two years ago at the Morgan Stanley TMT Conference. And I know that there was a little bit of -- I don't know how else to put it, but like you remember your freshmen year in college, first time away from school from home and what happened. It felt a little bit like that last night. So I thank everybody here that was a little bit more responsible and made it here on time to start the day. I'm James Faucette, Senior Research Analyst here at Morgan Stanley. I cover FinTech and very excited this morning to have with us renowned trader, long-term crypto bull and CEO of Galaxy Digital, Mike Novogratz, thank you very much for joining us today. And it's going to be a really exciting conversation. We're going to talk about the world, what's happening, Crypto's role in it and more importantly, perhaps Galaxy Digital's role in that broader scheme.

So maybe, Mike, let's start there. First, are there any preamble or regulatory things we need to disclose from your perspective?

We're with the SEC, so I'm not going to answer questions about that process.

Okay. All right. And for any Morgan Stanley-related disclosures, you can go to morganstanley.com/researchdisclosures. So let's start with Galaxy Digital. And what your objectives are, you've often been quoted as saying that with Galaxy Digital, you want to make Galaxy the Goldman Sachs of crypto and for it to capture the full opportunity within crypto. What does it really mean to be the Goldman Sachs of crypto or more perhaps appropriately to be a one-stop shop in the crypto?

Yeah. I had actually changed that monitor because I realized young kids don't want to work for the Goldman Sachs crypto. They want to work for a crypto company. And it sounds silly, but it's really actually important, right? This is a revolution. And I started looking at crypto way back and thought it was a trade originally. And then what -- why I got into it, I realized it's a lot more than that. This is a move away from centralized systems where people trust the center to decentralized systems. And if you're young and you're looking up at the leadership of our country over the last 30 years, you see debt to GDP having gone from 45% to 130%. You see obesity. The average American has gained 35 pounds in 35 years. So now the average woman is 5 foot 4 inches, 170 pounds. We have high diabetes and heart disease. We see all these things. And so young people are like, we want our own thing and so it really is a young person's revolution. So I started Galaxy with this idea that I wanted to be young again. That I wanted to be able to connect this energy and the understanding of what was going on in crypto to the institutional world, right? The revolution can't happen without the institutions. And so our original mantra was we'd be the bridge in both ways, and we would go to the crypto world and say, hey, there's a lot of lessons and there's a lot of knowledge that you guys need to succeed. And so trying to sit in between those two worlds and we continue to do so. And so the idea of the company was to use our own capital to really understand the space, to be on the cutting edge and take those lessons and then bring them to the different units. So we have an asset management unit, where we'll manage other people's money. That's growing. We've got lots of partnerships. We've got a partnership in Morgan Stanley. We got one with Golden Sachs. We've got one with Bloomberg. We have one with Invesco on the ETF side and so our knowledge, their distribution, and so that business is growing. We've got an investment banking business, i.e., helping companies in the space and out of the space, navigate. And we've got a big intermediation business. And soon enough, we'll have a technology platform when we close our deal with BitGo. And so the one-stop shop idea really came from this idea that once you have knowledge, there are lots of different pockets of institutions and ways institutions play that we want to touch.

So we're going to spend a fair amount of time on Galaxy itself. But I want to get your perspective and draw on your long history of being a successful trader and specifically to talk about what's been happening in the crypto markets of late, and especially the trading dynamics that at least for me, have left me scratching my head. One of the things that has stuck out is that crypto seems like it has become more correlated with equities, at least of late. I mean for what was always talked about as being uncorrelated, it seems to be highly correlated. Do you see that remaining correlated with equities or what breaks that correlation?

Yeah. Listen, I think in terms of short-term and a long-term or medium-term answer to that. In the short run, assets went up because central banks pumped tons of money into the system at levels we've never seen. And so it didn't matter if it was a baseball card or a crypto piece of crypto gold, i.e., Bitcoin or a tech stock or any growth equity. And when Chairman Powell decided to take his -- I need to get reelected close off and put it on the central banker close back on and look at a world where he's five, six, seven rate hikes behind the curve and say, I'm going to be a hawk. I mean he used the word very, very, very worried about inflation. I've never seen a central banker use very three times in a row. Asset price is correct, including crypto. And part of the thesis was crypto is going up because the central banks will be damaged forever, we had a pivot. And there was lots of speculative froth in all assets. That's not really the story. It's the story this year, if you want crypto from $65,000 or Bitcoin, you really aren't feeling good now that it's trading $39,000. But there's a much, much bigger story and the reason Galaxy exist, the reason I'm in this space. And that is this idea of moving away from centralized to decentralized. What's so unique about what happened in the last month is that there is now not a nation state on this planet and not a major corporation that can afford not to have an opinion on crypto and digital assets, not one. Everyone needs crypto and digital asset knowledge. You might not like it, just like every country needs an opinion on trade and money and weapons. [ Webinar ] a nice thing to think about. You need an opinion. And so you look Russia banned crypto and now that like, oh, maybe crypto will help us. You can see them unbanned crypto. And so the thirst for knowledge in this space is only going one direction. People used to always say, well, crypto -- Blockchain is a solution without a problem. That was -- you heard that over and over. Well, last year, we got the first killer app in Blockchain, and it surprised me, and it wasn't payments, right? The payment system works pretty well in America, right? Apple Pay, pretty cool. It wasn't payments. It wasn't DFI and a lot of people thought it would be DFI. It was NFTs. NFTs are exploding. Why? It's the same concept as Bitcoin. It's about opting into a community, right? With Bitcoin, we convinced the world over 10 or 12 years that there could be a scarce digital asset, in this case, digital gold. And there was this crazy math that makes it verifiable in authentic and you can trust it. And so I used to sit in these lectures and try to tell people about the [ visiting ] fault tolerance and all the stuff that I barely understood to convince them why Bitcoin was safe. People believed it. There are 150 million people around the world that believe that, including Stan Druckenmiller, Paul Jones, lots of clients of Morgan Stanley. And so it became a social construct, it became something people believed as a place they can store value. NFTs, it took a week to convince the world that these were actually unique digital objects that you could improve authenticity of. And so the acceleration of how fast that happened is breathtaking. I don't go a day with at least two phone calls from artists, creators, corporate CEOs, think of the TED conference, how do we use NFTs or Equinox or you name the company. Visa came out and bought NFTs because they thought, well, the digital world is going to go from -- they said, they told me, right now, the average Visa holder swipes their card once a day or 0.9 times a day. They think in a few years, 10 years, it will be 10 times a day because they'll be buying digital goods. The NBA made an extra $130 million last year by selling digital highlights. That's accretive income. Nike bought a company called RTFKT that does really, really cool digital shoes. RTFKT sold way too cheaply. I always wanted to work at Nike and I was like, the revenue that company is making, which falls right to the bottom line, probably is going to add $100 million. And so like this is real commerce happening and it's the same exact technology. It's how can I have a scarce digital asset and create a community -- connect the community to.

Yes. Like -- I mean, I have to -- and maybe this is like too much confession, but my own is that sometimes I struggle with the utility, for example, on payments because I'm like payments are pretty -- nobody has a real hard time spending money, right?

In the West.

In the West, right, no, to be fair.

And so think about what happened like Elizabeth Warren, every once in a while I want to get in a wrestling match with because -- and I'm pretty progressive. I'm center or left at least. But on this, she's been so backwards because it's -- Russia happens, the first thing she says is when you put sanctions on the crypto stuff. I said, wait a minute. Do your homework. There is zero chance that the government of Russia can avoid sanctions with crypto. You can't move huge sums of money on a public Blockchain and not be caught, right? We hired Mike Morell, who used to run the CIA, we being a consortium of us crypto people. And he had never bought a crypto to do a study. After nine weeks, he came back and said, if you were going to create a system to catch criminals, it would look like the Bitcoin Blockchain. And so stop, you can't evade on a massive scale. But what I tell you, you can do if you've got s***** stewardship in your country with your finances, if it was Turkey four years ago and you're looking at Erdogan, who's just making a mess of things or Putin, the little guy can save his hard-earned labor in something other than that local currency. And Bitcoin and digital assets should be a human right in those countries, and that's where you see used for pay in the dot.

Right. So -- and I -- like I understand a lot of the arguments that are around that. But on NFTs, you raise an interesting point. Like, I guess, I kind of struggled with NFTs like 20 years ago when the Korean video game makers started selling virtual goods in their games. I'm like, well, I don't understand why people are going to pay more to add to their game that they already paid for, right?

Oh, and they did.

And they did, right, and they did. And I think that's pretty universally understood. So NFTs and that kind of thing, I think makes sense as you -- and then so the fact that it exploded is reasonable to me, but if we look at this idea of digital gold, what is -- when does digital gold start to look and act like real gold because it's back to a trading question, right, like it hasn't of late.

Yeah, it wildly outperformed gold and now gold is outperforming it. Listen, what happened with Zelensky really, the guy is a freaking hero. He shows up and he changes the face of politics in lots of way. So Europe comes together and says, a week before, I said there's zero, zero, zero chance we'll go with the SWIFT option. It's just -- it's the end of the dollar. And the moment happens. Europe says we're doing it, screw Russia, they might own assets. They really don't own those assets. That's not a really good thing if you want people to believe in the dollar. So if you're China, you're like, oh, God, I got $1.4 trillion of treasuries that if I attack Taiwan, might not be mine anymore. It's not the same thing that's really owning those treasuries. So I don't think China is going to attack Taiwan any time soon. I think they'll probably sell their treasuries before they attack Taiwan. I'm not trying to make jokes of it. The idea of the dollar as this sacrosanct reserve currency is on the way down. It just is. And it's going to get replaced by a hodgepodge of other things. Gold will be part of it. I'm positive crypto will be part of it and Bitcoin will be part of it. It will be other currencies, but we are not going to see countries put their entire worth in and think about even ourselves, right? Some people love Donald Trump. A lot of people don't like Donald Trump. But Donald Trump tried to overturn the last election. What if you had said, you know what anyone who's not listening to me, I'm freezing their money? That could have happened. Well, it just happened freaking Canada, where Trudeau had said if you support those protesters, those truckers with it GoFundMe, we're going to freeze your money. Look, what the hell is going on? And so everybody is going to want something that lives outside that sovereignty. And you're going to see it on a geopolitical scale and you're going to see it on an [ imagereal ] scale. And so there will be a move to self-sovereign in some ways.

So last one on macro before we go back to digital and -- or go back to Galaxy and its role in the crypto sector generally. And you've just touched on the political realm within crypto and the world generally. How do you see one of the favored features of crypto and its ability to be apolitical as you're describing, evolving going forward, especially as more established players like some of the large exchanges or financial institutions, et cetera, look to adhere to sovereign regulation. Because ultimately, even though you may not trust the government, they can still put you in jail, right? Like they still can physical?

Oh, yeah, yeah, yeah, no but. Listen, we play -- at Galaxy we play in within a regulated sandbox, right, I got regulators [indiscernible] all the time. And what's interesting is almost all the crypto trades do through these exchanges. And so it's why this idea that it's going to be used to evade stuff isn't real anyway. And so if you're a bad actor, there's a very decent shot. You're not going to be able to transact. It's shocking how many phone calls I get. I got a friend. He's got some giant amount of Bitcoin he wants to move. And I was like, okay, like he probably could just sell it to any exchange if he is legitimate. And so it doesn't happen, right? It's harder to do than you think. And so -- in the long run right now, let's assume you were a Russian Oligarch and you had money hidden outside the system in a bit coin. People couldn't confiscate it if you had it on your own treasure, but you couldn't use it. And so it is an interesting thing. It doesn't really protect you in a direct face that you're doing wrong or if the government is doing wrong for a period of time, but it keeps your asset away from the system if you want it to be.

So it buys you time. Buys you time and optionality even if it's down the road is the way you're thinking about it. Got it. No, that's really, I think, important insightful, right? Because to your point, is like if -- at the very least if I get time, then I can figure out something else down.

Well, listen, and it works the other way, like there's been $30 million of crypto donations to Ukraine that happened overnight. Ukraine got them, sold the crypto and bought military equipment with it. And so like the crowd funding capacity of a global -- we've never had global markets. We think we have, but we haven't. We got a JGB market, a European government bond market, U.S. treasury market. In crypto, there's compound. There's a global market. And so it's really -- I used to talk about this in 2017. It was the first global speculative mania, right? There was Mr. and Mrs. Watanabe in Japan and the Koreans and the Chinese and the Russians and you had this entire world buying it at the same theme. That had never happened before. And so there's something powerful that understand that it's not just a domestic market. The crowd sourcing capacity, you're going to see a world where films are all crowdsourced in these Dows. And as soon as the political or the regulation around Dows, right, right now, Dow's aren't limited liability companies, right? People are starting to set them up in places like Wyoming and Delaware and trying to kind of create the political structure. But the Dow concept is really interesting. The company without people that's got a governance function that functions like a company. And there was two movies that they raised the money overnight.

Right. Interesting. Well, we just spend all day talking about the functions, but let's spend time on Galaxy itself. And I -- look, I immensely appreciate your views and on the global and drawing on your trading background and investing background. But closer to what you're doing on a day-to-day basis, Galaxy last year raised $500 million in a convert really to fuel its growth plans kind of going forward. And given your expansion over the last 18 months, what's the top of the list areas to deploy that capital? Where are you really focused on investing in the business?

Yeah. It's people. The technology side of our platform, both in Galaxy and in BitGo. And BitGo's hired 140 engineers in the last year. And so as this ecosystem grows, right, if you're doing custody and you want a custody, each token is a completely different makeup. It's not -- it scales linearly -- so can you get the best engineers and can you hire them and there's a war for talent, so it's getting more expensive. And so it's mostly people. We're trying to scale our platforms. To-date, we have made lots of money like we'll post our earnings and through November, it was $1.4 billion, I think, in profits last year. We've made most of our money by being good investors by having a venture portfolio and investing portfolio. But we're in this transition to building out these platform businesses, and that's asset management, investment banking, our custody and wallet services business. And our intermediation business, which is credit and derivatives and trading services for all the customers that are coming. And we see customers coming in every bucket. So it's traditional hedge funds are all participating now. There's a huge bucket of growing crypto hedge funds. There's corporates. There's high net worth who are big participators, University endowment. And just recently, you saw Texas teachers said we're going to participate. And it's the same way when Paul Tudor Jones wrote his letter saying, why he was buying Bitcoin and it got public. It kind of freed up every other hedge fund that say, hey, I wanted to do this, but now I have got some air cover, I can do this. And we saw all the other hedge funds start to get involved. It takes time, right? They got to figure where do I custody and should I do futures or cash. And there are all these diligence questions that get answered, but like the herd moves. And now even in the big state pensions, it's moving. And I tell you, I've been traveling a lot and visiting and they're either in process or their finish their research and they're presenting to their board. But you will see within two years, I would say 60% of pension funds participating in digital assets. It goes at what I said at the beginning, you have to have an opinion and two years ago, you did.

Right. Yeah. So, the things that you just described, like this institutionalization and in my mind makes you somewhat unique in the crypto world. It seems like a lot of the other organizations have been set up basically to kill the institution, build around them or that's their long-term dreams and ambitions. But you're focused on serving institutions. And you mentioned you think everybody is going to have an opinion and start to move within a couple of years, 60% of pensions you just said. But how far along are institutions into getting into crypto really? And how does Galaxy not just help them do that but differentiate itself among the growing number of platforms in this?

Yeah. Listen, I would say it's the first innings, right, even when people have gotten in. So a lot of insurance companies have gotten in. They bought Bitcoin as a long-duration asset because they said, well, doesn't look like 10 and 30 years are going to be a great buys over the next 15 years. And so they literally put Bitcoin into their fixed income portfolio. But it was small size. And so I think you'll slowly see that grow. So I would say we're in the first inning of the institutional adoption. Listen, most of the competitors and maybe they were much smarter than me, they all started -- crypto is a retail-driven phenomenon. It's the first real market phenomenon that started from the bottom, right? It is the little man's revolution. And so most of the big players and the two most successful were not just focused on retail, but they were focused on giving a lot of leverage to retail off, so that's finance. We started with institutions and suffered for a while because it's taken so long for institutions. Now they're there. Listen, we have competition. The guys that started with retailer have made a lot of money and saying talent, and institution market as well. And some are doing well. I tell my employees all the time, when you first joined, there was a real risk that this thing would work. And now I don't think there's any risk other than execution risk. Can we execute? Can we provide the services to our clients, we listen to our clients and give them what they need better than our competitors.

So what are you doing at Galaxy to deliver that's better than your competitors? Like what do you think are the key execution points for Galaxy to deliver to the institution?

So like when I start in the intermediation business, right, when you're constantly in the trade by world, think of like the sales trading derivative, the prime brokerage world. It's risk transfer. I think our derivative desk is the best in the business so far. Why we came from emerging markets and commodities backgrounds? This feels a whole lot like that. It's credit, right, providing credit to institutions, providing leverage. In time, no one really does prime brokerage great yet, but we're working our tail off to kind of get there. And at times, it will be full service prime. One of the things that people forget is how young crypto is, right? The industry in lots of ways didn't start in earnest till four or five years ago and didn't get any acceleration until COVID, so two years. And so I don't expect it to supplant Wall Street anytime real soon, right? But I think the path is growing at an accelerating rate.

So it took us four years to get to inning number 1, like innings two, three, four, you think come at a faster pace. So there's lots of parts of crypto. And I think Bitcoin tends to -- it's a lot -- it's highly valued and attracts a lot of the capital and attention. But obviously, there are lots of other things that are happening. What do you see are kind of the most exciting areas within crypto, but are hardest for financial institutions to touch?

So one of the things that most institutions are coming in first is venture because when you think about rebuilding the platform of how we process, finance, how we process culture and consumer things on a Blockchain, it's technical's help, right? So there's this theory cryptocurrency ecosystem that most likely becomes core architecture of the base layer of trust that things get traded on top of. But it's got lots of competitors that lead to be collaborators or competitors. And then there's things that are built on top of it to speed it up, right? Layer two solutions like Tokamak, Polygon or Starkware, these -- and all of a sudden, people's eyes glaze over. Starkware is in that, in the Defenders or the Avengers movie. And so if you're not willing to go really deep, you're outsourcing that knowledge to somebody like us. So we -- our asset management business have a venture fund of funds. We have a venture -- big venture business around the Metaverse. Lots of institutions are coming there first because it feels safer and it's kind of where the cool technology lies. Some people make those bets themselves. I always say it's adult swim only. A lot of times, if you are late to hearing, I heard Solana is a great token. It's already up 150x. And so one of the things that's unique about this space is because there are these token economics at play, you often get liquidity in a venture bet four, five, six years before you should -- but before you really know will this actually be adopted in work. And so it's a treacherous and at times, wonderfully profitable but times wonderfully dangerous place to work. And so most institutions want to kind of start with, keep it simpler, buy some Bitcoin, buy some Ethereum, buy our stock or put some money in a venture bucket.

So I want to come back to one of the points you just made in just a moment. But -- you kind of threw out earlier in the conversation, DFI, where does DFI fall on the list right now? And where do you see institutions and traditional finance interacting with DFI?

Yeah. So what DFI is, just to make it simple is right, it's decentralized finance. It's trying to, in essence, supplant or replace a lot of traditional systems with a peer-to-peer system that's based on code. So think about it like the New York Stock Exchange and all the legacy infrastructure and people that work there. And then think of Uniswap, which is a piece of code that does the exact same thing. DFI will win in the long run. I will literally bet my pants, jackets, shoes and glasses. And it will win because it's better. It's atomic settlement means it's instantly settled. So there's no settlement risk. I don't know if you guys are watching what's happening at the CME right now, but someone's got a $12 billion margin call on nickel, $12 billion. Someone's going to be feeling a whole lot of pain in about six hours when their boss calls them up and said we lend money to who, right? So it's instantly so you don't have that in DFI. It's composable, which means you build something really cool and I get to build right on top of it. We wouldn't have Uber or DoorDash if we didn't have GPS on the iPhone, right? You're building on top. The iPhone was able to extract a huge rent for that encrypto -- it's open source. And so it's amazing how fast innovation and how many iterations happen. It's transparent. You know exactly what the commission is being charged on Uniswap or you know exactly the trading volumes, it's everyone can see it. And so it's really interesting when you start thinking about things like this margin call on -- we know exactly where the stuff is on the Onshape stuff shipped out. And finally, it's going to be a whole lot cheaper because it's code. And so there's no way traditional finance will be DFI. What's stopping DFI from really exploding is regulatory uncertainty, right? When I'm trading with a smart contract, everyone fears can jug on could be on the other side. Now there might be 25 million Kim Jong-un's when you talk to the regulators. You can't go on. I mean the reality is there's a tiny amount of illicit activity that's happening in crypto, far lower than happens at traditional finance or cash. And that's what Mike Morell's report showed. But we haven't won that argument. And so until regulators get comfortable that there's a system to make sure you're not transacting against bad actors, you're going to see it stalled. That's coming. There is a huge amount of brain power focused and trying to work on this problem of how I can trade with someone anonymously, but know he's checked. There are these things called zero-knowledge proofs that will allow this to happen in time. Think of blue check on Twitter. He's blue checked. I don't even know who he is. I just know he's okay. And so the moment we clear that you're going to see DFI take off like crazy. But remember, people have a lot to lose with DFI. One reason I'm so bullish NFTs is it's accretive. No one cared that the NBA made more money. So did it lose because the NBA made, right? Where if Uniswap becomes -- it does $2 billion a day right now versus the New York Stock Exchange, $50 billion of that, my numbers could be off by a little bit, but they're not by a lot. If it becomes as big, someone -- Jeff Sprecher is going to be like, what the hell is going on? And so there's a lot of pushback on the regulatory side from the people that have lots to lose.

So talking about DFI, it's been talked like it's garnered headlines, obviously, and been talked about the BlockFi, $100 million settlement with the SEC. So how do you think about that event and what you just described? And does it move the space forward by setting boundaries or does it continue to inhibit its development?

Gary Gensler, he's my regulator, so I better say nice things about him at this point. No, I worked with Gary at Goldman Sachs. I taught his class at MIT once. I talked to him right before he started his job. And I really thought he was going to be very helpful to the crypto community because he understands it, and he actually likes it. The reality has been since this administration change, the SEC continues to try to regulate through enforcement. And it's not the right way we should do this as a country. It is as backwards. And so it is unbelievably slow and painful to try to understand what the rules of the road are. In BlockFi, you could argue, it looks like a bank, smells like a bank probably is a bank, and they probably should have some consumer protection. I don't think that's the wrong assessment to be fair. I would be far nicer if there was a government or that set rules and people believed in it. Some of this is just jurisdiction. The SEC doesn't have jurisdiction if things are in securities. And they haven't made clear at all what the securities we're supposed to use is how we test, which is a 1930 era piece of legislation that doesn't make sense for this new technology. And so we are working hard, we and the whole crypto community at staffing up our D.C. offices and educating. I think the most optimistic thing about crypto is ever since the Infrastructure Bill, where literally the crypto world shut down, three million calls to senators in a weekend, three million calls to senators in a weekend. It really shut down D.C. We've seen nothing but an increase in -- like an exponential increase in attention from politicians trying to understand this technology. And now I'm getting calls from senators, incoming calls saying, hey, what do you think about this? Can you help here? Crypto's unbelievably popular, right, among young voters especially. There are 60 million Americans that are in crypto, and a lot of them are single issue voters. And so it's really a bad position. You can be neutral, but to come out and say, I hate crypto, but the swarm comes at you pretty quick. And so you're going to see in this 2022 election, the first election where the crypto lobby, literally the crypto has an impact.

Interesting. So Galaxy, we tend to keep bearing into the macro. But back on Galaxy, that you have operating businesses and you also use your balance sheet to hold companies and coins directly. How do you think about those two functions from a capital allocation and long-term planning perspective? And do you think balance sheet usage is key to holding an edge in this space and keeping your eye on potential new offerings and businesses?

Yes. So listen, I think we raised a lot of capital last year in the public market, right? We raised the $500 million convert, but we also raised capital by selling a lot of crypto that it went up. And so up until now, we've funded our company with profits. That will change, right? We are -- our balance sheet will migrate -- some of it will migrate to our asset management business. We'll keep some stuff on balance sheet. I think we have to keep our edge. We have investments at 150 companies around the ecosystem. More of that will get done in funds. And so over time, you're going to see the earnings balance shift towards more recurring stuff. Look, everything in crypto is correlated with the overall price. And so if you have a custody business, your assets under custody go up or down as the price of Bitcoin goes up or Ethereum or Luno, depending on what your custody. If you have an asset management business, your assets go up. And so one way there or the other, we're always going to be correlated to some degree to the price of crypto as for any company in our space for the next 10 years. But we are going to, in time, buffer the volatility of those earnings with having less on balance sheet relative to the businesses. And that's where all our growth is coming.

Right. Last thing, we just have a couple of minutes here, and this is talking about environmental impact, specifically at Bitcoin, some of the others, but this is always a topic that, I guess, should be addressed when we're talking about crypto generally. You were recently quoted saying that people misrepresented the environmental impact of Bitcoin mining. What do you mean by that? And what is the environmental bent that is missed, I guess?

So Bitcoin uses electricity. And not only does it use electricity, it publishes exactly how much electricity it uses every day. And you can take those numbers and compare it against things. And people love to say, well, it uses as much electricity as Denmark. If you've ever gone to Denmark, it's a pretty sparsely populated place with [indiscernible]. It doesn't use a whole a lot of electricity. Bitcoin uses less electricity than Christmas lights. It uses 0.12% of the world's power, 0.12%. I would argue it is providing a really valuable service to the 160 million people that use it that if I was God of electricity, I would give it that 0.12% and growing chip. We had lost the battle in lots of ways. Now the industry is not dumb, right? We have a real ESG plan at Galaxy. It's public. We've already stated that 80% of our mining is green, and we're on our way towards fully stated.

But I think a lot of times like green -- like zero carbon emission is conflated with being green, right? But like zero carbon emission is not without environmental in.

So this is not green by buying carbon offsets. This is like wind, flare gas, nuclear, like -- the interesting thing about crypto is -- crypto mining is they can use stranded power. It can use the excess power, which you get a lot of in places where there's renewables, if you think about it. And so listen, even one of the biggest miners was in Kazakhstan, which was all coal, they've all pulled out, they moved all their machines out of Kazakhstan and they're moving into Georgia and in Texas. And so you're going to see more and more of the Bitcoin mining apparatus happen around what I call truly green, not fake green.

But even truly green like, let's say we did it all solar, Mike, is that I haven't done this calculation but it should be pretty linear is that when we are at $65,000, like you would need as much solar -- you would have to cover the entire state of Texas with solar panels, right? Like that's a big environmental impact. So is there a way that we can work through this. I mean maybe taxing chips is a way to do it, right? Like if you move taxes, it reduces the profit for electricity, I don't know.

Again you have to look at there's -- one of the reports as often as YouTube uses 4x or 5x as much electricity as tickling will ever use should be like tax YouTube users. Should we tax people that drive their clothes because dryer, we can dry them on a line and would use nothing and it would throw a pain in the ass with those dryers that use a whole lot of electric. So you have to say, like, does this provide a service and does it deserve part of the electricity budget? And I think everyone in the crypto community would say, duh, of course, it does I fundamentally believe it does. And listen, there are other things happening. Ethereum this year is going to merge and it's going to move from proof of work which uses a lot of electricity, then called proof-of-state. That will take half of the crypto universe, I think, and move it to a far more energy-efficient system. I don't think that denigrates Bitcoin and Bitcoin use case. What makes Bitcoin so good as a store of value is its security apparatus. And if it was really cheap, it wouldn't be safe.

Right. Got it. Well, Mike, I could keep going for hours here, but I think there are other people that want to talk to you later today. So thank you very much for joining us first thing this morning. Mike, it's been a pleasure talking to you. I hope to catch up soon.

Thanks, guys.