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

I think we can go ahead and get started. It is a great honor to welcome Mike Novogratz,CEO of Galaxy Digital for a discussion about the company as well as the broader blockchain and crypto industry. Mike has an impressive background, needs no introduction, but from wrestling to the military to banking to asset management and now crypto and blockchain. We've had a couple of chats in the past, and I always feel that you've got a very fresh and unique perspective. So Mike, thank you for being here, first and foremost.

Thank you.

Maybe we'll just jump in first with some industry questions and then move to some more company-specific questions about Galaxy. So this is something I don't want to ask you. If you compare your views on blockchain technology today versus 2 or 3 or 4 years ago, has anything changed in terms of your belief around like the importance or the transformative potential of the technology, despite all the gyrations in the market, is blockchain still as big a deal as you previously thought it was?

I remember when we first started talking about it, you talked on these latitudes. And it's a story, right? How we're going to decentralize the world and everyone is going to be -- everything is going to get built on these decentralized blockchains. Blockchain is a database that you can share. It's relatively a simple concept. But the technology to do it and do it at scale is difficult, right? So tomorrow or the next day, we get the theory of merge. That was originally scheduled for 2017, right? I bought a theory in 2015. The merger was going to happen in 2017. And it has taken 5 extra years, it's an unbelievable technological accomplishment. And it's wildly important because it shows that this decentralized or mostly decentralized community, right, can actually accomplish something that big without a CEO, without the Board of Directors. Now you could argue that Alex maybe is the spiritual leader and CEO, but he's really -- there's a huge amount of people contributing to this thing. And so I would say, we're going from story to reality, but we're still a long way from having a trusted, scalable, fast base layer of trust, blockchain that people are going to feel comfortable building on. Like even if it was perfect, it takes a while to get people to trust it. And so when we have crop like we had this year where crypto gets dispersed with frauds with Three Arrows Capital and that's really horrific risk management with a lot of these credit shops. And even though they weren't unchanged shops, it sets the whole industry back a little bit because you've got to slowly convince people how this works and why it works. I'm much more optimistic than I was when it started because I've seen like the birth of the NFT space. While NFTs were a speculative frenzy, there was a gambling component to most of them. Make no bones about it, the idea that you're going to have unique digital assets built into a metaverse is real, right? As we spend more and more time online, as metaverses get built, we're raising capital for a company called improbable in our banking side that I think will probably do $300 million or $400 million of revenue next year. So real companies that are building these metaverses which go beyond just being able to see people, you can interact. And every major brand is lining up to get them to build their metaverse. And so in that, you're going to sell unique digital assets, that only exists because it can exist on a blockchain. People really can trust that they have that asset, they can move it around. And so I do think we're heading to a war where more and more stuff will get built on it. It's just not going to happen next year. This is a multiyear process. And so -- we have this amazing chapter of crypto in 2017, which was all narrative, call it, 90% narrative, 10% building. This last 2020, 2021 frenzy was probably 70% narrative and 30% building. And I think we're moving to this next more painful era, which is going to have to be 70% building and 30% narrative.

Is the infrastructure and the kind of, what I like to think of as the services layer of the blockchain, is it ready to support -- the question I always get is tell me what the killer app is? Where is the utility? Why -- can you show me what the path is here in terms of the application level of it? And I always feel like I -- there are some stents towards applications, but it feels like the underlying to your point, the merge, the underlying kind of infrastructure what's required in order to see the whole thing blossom is still not there. What's your view on where we're at on the infrastructure side?

We're getting there.

Getting there.

Right? First of all, we're never going to have on blockchain. Even once the theory emerges and once it speeds up, it will still need a Polygon or a Stockware or some other scaling solutions on top. So you now have this idea called modular blockchains, where they do different parts of what one blockchain used to do. And so it's going to be this fabric of this shared supercomputer. And it's perfectly capable for some to scale some processes, low-value game parts, transactions in. Can you scale Monster stuff? Not yet. And so I think we're a little ways away. Listen, there are a lot of killer apps. In time, NFTs actually will probably be the killer app of the blockchain, right? Your health care records will be in NFT one day. There'll be whole businesses built in NFT, in and around them. Get it, the metaverse doesn't exist really other than our phone. And so wait till AR glasses and these things that probably are building on your screens and then rooms like this where the whole walls or screens and so you can actually have a virtual conference. That's all coming. Actually, if you see, we invested in our venture businesses. And so I still think we're 3 to 5 years away from really feeling like, oh s**t, this crypto thing is changing the world. Like payments is another one, like Apple Pay is pretty damn good, like really in the U.S. there's revolution in payments. But try to send money to your cousin in Zimbabwe or even your cousin in London, it's a pain in the rear. And so we are going to see international payments blockchain take more and more of it. And in the developing world, you're going to see a lot of these payment systems from crypto payment systems grow fast.

That was one of my questions about potential -- speculation about what potential killer apps might be, but I think you kind of answered the question a little bit with NFT and payments. What about DeFi? As you mentioned before, there's been a lot of turmoil in the ecosystem. Has the boom kind of come off the roads with DeFi? Or do you still see that as a place where -- I know that's a pretty...

So ironically, this -- crapping out this crash that crypto had, and crypto came down this year because the Fed became hawkish, and the same reason growth equities came down. And heck, you could have bought Bitcoin or Zoom the day before COVID was announced. And you still have doubled your money in Bitcoin and you're actually down on Zoom. And so like all growth got killed. Crypto took the extra punch in the stomach because we had excess leverage, we had fraud, we had lot of stupid behavior. None of that was unchanged. That was all companies like Celsius, like TradFi companies that were dealing in crypto, which were nontransparent, which were horrifically managed and at times were deceitful. And so you get that in a frenzy, right? And so it's healthy in some weird way that, that gets wiped out of the system. The DeFi system worked. Who is using DeFi? The crypto sandbox was using DeFi. And so it was used mostly crypto to crypto in a speculative way. But there's amazing innovations that are happening there. And so how do we go from this idea of a sandbox to actually using it? It's all about KYC/AML. And I mean, today, I did an interview with one of our portfolio companies that is creating a skin where you can put a -- think about you buying a theory from someone and you can put a skin around it and the company doesn't -- they know your KYC. And so using these things called zero-knowledge proofs, I can sell something where you don't know whose it is, but you know it's been KYC by this reputable company. Solutions like that are essential for this whole crypto space to actually matter. Otherwise, we're just putting a new wrapper around something. What zero-knowledge proofs allow, getting KYC that's not centralized allows privacy and allows that idea of being able to take retail and institutional and mesh them, right? There are right now crypto protocols that are walled gardens, like -- so there's a thing called [indiscernible] where you've got to be institutional, you've got to get KYC to be a participant in it. But then it's just institutions with each other and you miss the whole liquidity of the retail, so it doesn't really work. And so you need to mesh the 2 together. That's coming. Again, we've invested in a few of these ideas. One of them is going to hit.

So it's interesting. So that risk management, KYC compliance sort of technology layer is almost like a bottleneck, right...

It's a bottleneck. We'll need on chain compliance. And I think whoever solves that is going to make a lot of money.

And yes, I couldn't agree with you more. I feel like when you see things like Uniswap or other decentralized protocols, it's hard not to imagine that they're not going to have a big impact on the technology of making markets or whatever it is, it's hard not to see that's the case from my perspective, at least. And so regulation, maybe that's a decent segue to regulation which is always kind of -- it's kind of like groundhog day a little bit, regulation and crypto perhaps. What's the latest view from you? Do you think that things are progressing...

I worked with Gary Gensler when I was at Goldman Sachs. He taught us class at MIT, gives lectures up there. I know him pretty well. I thought he was going to be a crypto positive for the SEC. It makes 0 sense to me that we don't have a bitcoin ETF. And so if I just -- and there's no reason, right, Canada has one, Brazil is getting one, the U.K., not like it's some crazy idea. And so that tells me that for some reason, he's decided not to push the crypto agenda. I wish I could read his mind. I would tell you that there are 5 or 6 companies going through the process with the SEC to become public, Circle, eToro, some big companies that have just installed, bullish ourselves and so it's frustrating. I don't think anything changes until maybe after the midterms or until we get some shift of power. The brightness is I don't think anything horrible happens, right? The political awareness of how powerful the crypto lobby and community is showed up about 8 months, 9 months ago. And now the education level of both the left and the right is up 80%. And I'm going to D.C. next week. And when I went down there 2 years ago, it was literally the ABCs. And now you're having real conversations about what would work and what wouldn't work. There's a push to have Bitcoin regulated by the CFTC and that's probably a positive for the industry. And it is complicated. It's a 2-edge -- it's a chicken and egg thing. A lot of the tokens stalk because the token designers were trying to move theirselves around this definition of what a security is, the how we act, how we test. And I actually think there's a lot of hybrid security tokens that could do amazing things for innovation. It needs a bigger sandbox than it has. It needs a different regulatory pathwork; example, music artists. Right now, so many of the hot young artists first get discovered on TikTok. So they already have millions of TikTok followers. When the A&R guys go and say, "Hey, that guy has blown up," and they drive down and they offer the guys $600,000, $700,000 to sign over his next 5 albums. There will be a company soon that also notices that algorithmically and either drives down or sends an electronic administrator to these young guys to say, "Hey, you can sell, you can raise capital from your fans in this token form at probably 1/5 the dilution that you're getting from Atlantic Records or one of the big record companies." And you'll crowd source that $600,000 you need to buy your chains and make your album. And then you'll have a group of investors that are rabid fans anyways. Like that will happen. That's a security token as it is now. Can you get a sandbox where okay, under $5 million that's okay without going through the entire SEC registration process? We'll see. But I think that's where we need to start focusing on. Here's a problem give me a solution. And we have an SEC right now that's just saying they're all securities and if you don't know, just come and ask us. And it's not a healthy dialogue.

So do you think that we need a legislative fix here? This requires lawmakers to come together and say, "Hey, we're going to change the parameter. So this is the sandbox in which the SEC has to operate," is that...

Yes, we do. And there's been a couple of bipartisan pieces of legislation push forward out of the ad committee. I don't think anything gets done free pre the midterm. We've got a really strange political setup in our country. [indiscernible] the bizarre. And so we'll see how this -- it looked like it was going to be a runaway Republican rampage, now it doesn't. There's already that would have probably been good for crypto, maybe bad for the country. And so we'll see afterwards. I'm not that -- I'm not optimistic, but I'm not pessimistic because I do see both sides coming up the learning curve. And this should be bipartisan, right? It's libertarian from the Republican side, it's about freedom, but it's actually progressive if you really think about cutting out the middleman. It is bizarre to me that Elizabeth Warren hasn't embraced crypto. Like it's cutting out payments, right? Banks charged $8 billion last year in overdrafts, $8 billion that did not go to the rich people. I did not pay an overdraft fee. The average ATM fee, right, is 4.5%. A lot less for me than it is for the guy that takes out $50. And so there's a good reason why Progressive should like crypto, but Elizabeth Warren has a huge amount of pull still on the economic agenda, the Biden administration just doesn't like it. Yes. It makes no sense for me, actually.

Yes. And especially because the rest of the Congress to your point on a bipartisan basis seems to be certainly progressing from a couple of years ago, whereas this is a criminal enterprise and needs to be shut down to, hey, this is an industry that needs to be...

Yes, I have [indiscernible] recently and he's knowledgeable and he's engaged.

Yes. Let's talk about Galaxy a little bit. On to Galaxy. Give us an overview of the company for those in the room who are not necessarily familiar, your current offerings just kind of high level...

Sure. We are a 400- or 395-person company. We have 5 operating businesses. We have an asset management business, where we manage about $2.5 billion of other people's money and about 10 different products, a big venture fund that focuses on the metaverse and gaming, venture fund to funds business, some beta products and a new product which is kind of like a Bitcoin mutual fund though it's not done in a mutual fund wrapper, but a product outperformed Bitcoin. And so that's growing. We have an investment banking business, which is a classic investment banking business, which is booming right now because all of a sudden, you're getting this consolidation and everyone is excited about this space. Our biggest business is what would be sales and trading in a place like Barclays, that's derivatives, credit, OTC trading and proprietary trading within that, or arbitrage trading. That's a great business for us. We were -- and people were like, how do you like this credit on slot? And the honest answer is we just did what anyone who is well trained in credit would have done if you were at JPMorgan or Barclays or anywhere else. We had decent risk guidelines. We had concentration limits and whatnot. Most of our competitors, even the "smart ones" took bizarre risk. I mean, Genesis publicly had 2 multibillion-dollar loans to counterparties. I don't -- Barclays has many billion-dollar loans to counterparties. They have a lot of capital than Genesis did. And so that's a big opportunity for us. And so when I look at derivatives and hedging, lending, they're kind of simple businesses if you're a Wall Street guy. But there's new accounts, there's different product. And so developing domain expertise has been really profitable there. We have a mining business, mining partly for proprietary reasons, but partly because it feeds our banking business, it feeds our derivative business. Miners all should be hedgers. They all learned after this 69,000 to 20,000 fall in bitcoin that they should have paid more attention in the hedging. We were smart or lucky in that. Our mining loans, we forced them to put collars around them. And so we didn't get our head chopped off and our miners are now thankful for that. But that, I think, business continues. Our biggest source of P&L and P&L volatility, right? We had a $1.8 billion EBITDA last year and were down $550 million or something this year is our balance sheet. And so we've grown that from partners' capital of $350 million at the end of 2020 and '21 at the high $2.8 billion, probably $2.2 billion now roughly. That's from 150 investments in the space. It's from being long crypto when it goes up and hopefully less long when it goes down. It makes our company a little complicated because the volatility of our balance sheet outweighs, but I think it's really a nice business that we're growing or rough numbers hoping to do a couple of hundred million dollars of revenue in the next 12 months in those businesses on a cost base less than that. And so our franchise feels pretty healthy. We trade in the Canadian stock market. There's not a tremendous amount of liquidity in the Canadian stock market. Our stock price seems much more correlated to the price of bitcoin and how our company does. And so we've traded as much as 4x book and as little as 0.7x book. Hoping to go public in the U.S. at one point. We've been with the SEC for a while. They are slow playing the whole space. So I gave up making predictions on when that would happen. I just don't have any confidence in the timing.

Okay. One theme that we hear about often is institutional adoption. And there is a bull case that there's sort of quite a bit of institutional interest understanding the gyrations of the market and whether asset prices are up or down, but over time, there's quite a bit of institutional money that could kind of come into crypto and perhaps support asset prices. What do you think of that view, how much pent-up demand do you see on the institutional side? And how does Galaxy help unlock that if you agree with it?

So if I had gone to bed Christmas Eve, like I was a kid paying for that toy, it was the Big Wheel or whatever your toy was, this year, it would have been that BlackRock put crypto in Aladdin, right? A lot of them is the platform that all institutions can buy and sell off, and then they did. First with the claim-based product and then with their own product. My guess is in 18 months, there'll be lots of products that they offer on that platform. I think that's monumental for the space because it broadly says we're the biggest asset manager in the world, we have credentialized this as an asset class. We are going to make it easier. And then hence, less career risk for any of our institutional -- trillions to come in and participate. There was an announcement either today or yesterday that Citadel plus Fidelity and a few others, Paradigm consortium are doing an institutionalized exchange. Franklin Templeton just made another announcement about getting engaged. And so every day, I see people setting up infrastructure and wanting to participate almost to the point -- there was a guy from Golden Tree at my house. He said -- he kept using the word "inevitable." They're a big credit hedge fund who's now got into crypto. I was like lots of credit hedge are getting into crypto. He's like, it's just inevitable. Asset managers come to us and they all believe and you saw KKR today announced, they've tokenized one of their -- or a small piece of one of their private equity funds. And so this is going to happen, how fast it happens -- I would lie to you if I said institutions or banging down the doors to buy stuff today. But everyone went from first round discussions in education to coming up with plans. Texas Teachers last year, so they were going to put $1 billion in, in the year, market crashed and they said, well, we're going to be a little slower. But they haven't retreated. They just slowed their pace. And so they may see investments publicly, and I think they'll be a lot bigger next year. And so I do think it's happening. Again, a sell up always slows things down. But what's been interesting is we haven't seen any of those big players back off. And so for us, we try to partner with people. We have all kinds of partnerships. But I also look and say, we need to bust our hump or when the world comes back in a couple of years, Moelis is in the crypto banking business. So our banking business is better no more than they do. The competition is coming.

And we touched on this a little bit earlier with what's happened to I said DeFi and you correctly pointed out that, in fact, the recent sort of turmoil and trouble in the market was really not DeFi, it was TradFi operating in crypto. But talk about that term on how it impacted Galaxy? I know there was things like Three Arrows...

We did lose -- we had a perfect record on credit. We had never lost dollar on credit. And I, of course, was yelling at my credit guy that we weren't taking enough risk because you got to use at least once. Unfortunately, he picked Three Arrows to lose to. And it was -- listen, it was single-digit millions, it wasn't as bad as all our competitors. My grand intuition was that there was lots of fraud there, something miraculous happened between the time we looked at the balance sheet 6 weeks before they went bust. And that's hard to -- if you really think about your career on Wall Street, when someone who is a multibillion-dollar counterparty hands you just a fraudulent balance sheet, that's just -- you're just not used to it. And so I'm sympathetic to my desk and sympathetic to lots of guys from crypto, I'm not sympathetic to people that literally lost hundreds of millions of dollars. That was really our only niche. But one of the things that's come out of this is the cost of capital for crypto has gone much higher, crypto firms, right? We borrow a lot from places like Block Volume, Celsius and others. And then we'll use that money to lend it to our customers. And so that gravy train that these guys who are borrowing and leveraging up retail money, that was the deleveraging that happened. That's over. And I don't think it comes back. It doesn't go away from good because retail needs somewhere to put their crypto. And so there's a place for somebody who's more credible and I keep thinking we should do something like that as a bank. And even though your trades, you can put it all open source and let people see your balance sheet, so like proxy it almost. But -- so that has slowed. Our loan book is about 55%, 60% of what it was. Our NIMs are great. And so the credit business should be a business we continue to win in, and we're going to grow. But again, it's how do you get a cheap source of capital. And there are lots of people hunting around and so a lot of ideas.

And so -- I mean, it sounds like candidly, your risk models and mitigation was fine, all things considered. Have you had to change -- did you change any approach? Or is it just sort of...

Our franchise business risk model worked excellent, right? Every one of our businesses didn't have a down month. Our balance sheet, and this is -- listen, I have my finger on the trigger of the balance sheet. We sold over $1 billion of stuff last year. So you pat yourself on the back and when the market crafts, you snack yourself in the face and say, we should have sold $2 billion. This is a hard balance between having lots of assets on your balance sheet and being a crypto company and bringing people into your company because you believe in the space. The GDP of crypto right now is about $1 trillion. If it's not significantly higher than that in 5 years, me and my employees will have looked at this effort. If it's still $1 trillion, we're like, well, that's been a painful 5 years, right? Part of the bet that people are making on Galaxy or any company in the crypto space is that the GDP of crypto is going to grow. And so having exposure that has always made some sense. We will have less exposure as a percentage of our business going forward. We're going to do more stuff in asset management off balance sheet just because the volatility as a public company is a lot for people to swallow.

Talk a little bit about the client facing, the trading desk part of your business. If we -- maybe the asset management and trading desk side of your business, just trying to think about how the market is differentiated, like what -- how do you carve out a niche for yourself there? Or maybe a niche is the wrong word, but in the context of Coinbase and others who are also...

Coinbase became the 800-pound gorilla in institutional, while their whole business was retail because they had a brand and because they have a lot of capital and they had their own custody. One of the reasons why we originally went to buy a custodian was I had thought, just like in TradFi, people would want a custody away from where they traded. And so we use lots of custodians. And it turned out that in early stage, people were like, just buy it and hold it for me. And so Coinbase had that advantage. That's already shifting back towards what we originally thought. And so listen, it's a business that is built on onboarding people, getting them to trust you and providing them service. And unfortunately, it scales with time, it scales with people, it scales with relationship and it scales with good ideas. And so we're continuing to invest there. That's the biggest part of our P&L stream outside of the balance sheet. And we're doing a lot of kind of B2B2C like setups as well, like being the backend on the trading side. We have an amazing trading engine that connects to 29 exchanges around the world. And so providing that liquidity to aggregators of liquidity is also part of the business we're in.

What about M&A for you guys? It seems like maybe there's a lot of distressed assets out there in crypto. You have a pretty diversified business. You got a big balance sheet. What do you think in terms of M&A?

So we are looking actively at a bunch of small things. One of the huge frustrations of having a stock that trades below book or at book, and we have over $1 billion of cash on our balance sheet, which is probably $0.40 of the total value of the company's cash. You don't really want to spend your stock to buy big transactions. And so part of our goal is to get our stock priced to something reasonable. There's a lot of interesting ideas out there. So I'm looking right now on the $10 million to $50 million, $60 million range. We're looking at -- and those are almost acqui-hires in a few interesting areas. Galaxy has a wildly cool portfolio of investments in the future. But our businesses are really old school, bread and butter businesses, derivatives, lending. It's not really where the future becomes in 10 years' time. And so tokenization, the on-chain asset management. So those are the businesses I want to have bolt-on that will be the transformational businesses in 5 years' time. And it's not that derivatives and credit is going away. The transition from the world we live in to one that feels more crypto or tokenized or decentralized, it's not a 5-year path, it's a 25-year path. And so what I'm positive about is that our core businesses will be core businesses in 5 years, and they're good businesses. What I want because that's why we got into this thing for the revolution of transformation is to add the kind of sexy stuff.

How much do you see an opportunity inside the company from a technological perspective to actually deploy decentralized technology? I mean, is there a place for a decentralized exchange or a derivatives platform that is algorithmic or -- yes?

So we use them pretty -- like the whole derivative market changed immensely this year because a bunch of decentralized derivative exchanges were set up offshore. And so we're willing to use that liquidity. But again, it's a KYC AML issue. Until that gets solved, institutions won't go buy with the [indiscernible]. So we make, in that sense, arbitraging that. We have our own way that we can get comfortable and then take that liquidity and pass it on to our customers. That's where the world will go. And so you'd love to own a piece of it. And so we're working with lots of those ideas and trying to figure out how you do some institutional version. What Ken Griffin announced today is some hybrid of what a crypto exchange looks like and a normal exchange looks like, right, with his intended announcement what the consortium did. That's a step towards where things will go. But in the long run, ICE will get supplanted by companies like SushiSwap or any of these big decentralized exchanges.

And from both the context of your banking business where you're raising money as well as maybe direct investment, like what are you guys -- what are the interesting areas that you're seeing around the industry that you're investing, and you mentioned it was called Improbable. You mentioned that one. Is there any other areas or any other...

Gaming in the metaverse is still wildly. I think gaming has got a 20-year tailwind. If you just look at the demographics in Asia and how much they gain and the mid-east -- if you go to the mid-east, it's a gaming meta -- well, mixed metaphors. And so that piece of it, security like, God, when this all started, I remember looking at Chainalysis and a few of these companies, we had a couple of small bets and I was like, "s**t, they are probably bigger than those things," and I was probably right. It's just a -- the government is probably 60% of the revenue of all these security companies, that's only going one direction. Every government is going to have some form of digital currency. And so the infrastructure that Bitcoin goes on or Ethereum goes on, it's going to be roughly the same type infrastructure that digital currency, like CBDCs are going to go on or that Stablecoins will go on. And so as we move to tokenized equities and tokenized real estate custody, all of these security in infrastructure apparatus are going to be essential. And so quite frankly, the takeout for lots of these businesses will be the Bank of New York. So once the Fed finally says, okay, you guys can participate, you're going to see, I think, traditional companies plunge into the space, and they're all going to need some custodian. Even with NFTs, you couldn't really set up a legit NFT fund last year because you've got to -- the moment you get an X amount of assets to SEC, you've got custodies that are qualified custodian and no qualified custodians could call -- could custody NFTs and we had this. Well, we can tell the SEC to pound sand, and we're doing it anyway, right? And lots of funds did that, or you can say, "Yes, we guess we would do it, yes." And so this is all going to shift, right? You will have custodians that are qualified that do NFTs. And so I think that is still early in the investment cycle for security.

One part of the business that is a smaller part of the business admittedly that I was curious about is the mining. You guys have a mining operation. Talk about how that fits into the broader scheme of things. I think we had a conversation before where there were some potential, I don't know, cross-sell the wrong word, but...

Yes. No listen, we got into mining. We had the opportunity to hire Amanda Fabiano from Fidelity, who knew everyone in the mining space because when Fidelity got it, everyone would be Fidelity's friend. And so we thought let's put some of our own capital to work in mining because we think it's profitable over time. But just as importantly, let's build out a mining banking franchise and derivative franchise. We created the term Wi-Fi mining finance. And so that business, I think, will be a good one. What happened in mining is it looks so good. It's a classic -- the only parts that feels like a classic commodity cycle, it literally looks so profitable that everyone and their brother decided they're going to be a mine. I have a hotel in Jackson Hole and I was down at the bar and 2 different Mexican billionaires were staying at the hotel, and they came up to me and said, are you the crypto guy? And they've told me about their mining project, and we never heard of either of them. I was like, okay, mining, mining. And so everyone got into mining. And so now it's hash rate or how hard it is to mine a Bitcoin, it is getting harder every day. With Bitcoin price lower, it's a really bad setup for miners. And so you're going to see this mini-crises in mining where there will be lots of restructuring. There'll be consolidation. Companies will have to turn off their mines because they're not profitable and then mining becomes profitable again. And so we're, I don't know, 2/3 of the way into that cycle. But you're going to see some mining pain before you see pleasure. We luckily haven't deployed that much capital of our own in the space. We've deployed some. Mining also is a perfect asset for opportunity zones. And because we made so much money, we've deferred a lot of money into the opportunity zone plan. And so our mining is all done in opportunity zones. So that's kind of a tax-efficient way to make the economics a lot better.

It sounds like we've had some miners upstairs with this whole conversation. Well, we're just about out of time. Just a closing thought on like what do you see Galaxy over the medium term?

I see the industry growing. I keep telling my employees, buckle up, it's going to be an 80-month grind. But at one point, you'll see another inflection point. It will be driven by macro. It will be driven by technology, starting to catch -- every time there's a crash, you re-underwrite your idea, like, this really just tulips. Every single person in the space can just start feeling foolish and will tell you what a fool you are for not selling all your Bitcoin. And as we did that process, we thought we were going to fire 30% of our firm, and we did it. We underwrite every one of our businesses, and we actually have more people today than we did 4 months ago. We re-underwrote them. And so I am really optimistic in the medium term that this is marching in the right direction. And we want Galaxy to be a big part of that institutional adoption. I used to say, none of these guys are our competitors or collaborators because one guy can't be the market, you need competition. Now we're starting to see some competing, now new competition when I hear Ken Griffin gets into the space, I'm like, oh, s**t, he's really good. And so this is not going to be just because you're in, you're going to have to hire excellent people. I look at our training class this year. It sounds cliche. I couldn't get a job at my own training class. We have 15, now 14, we lost one of the guys to tomfoolery. But we have 14 unbelievable analysts that we got from the best universities. And these kids are all mission-driven and passionate, this can be about crypto. And quite frankly, it's the only industry you will work in where your 22-year-olds know more than your 40-year-olds. And so it's complicated to manage because your intelligence is in your youth and hopefully, your wisdom is in your older people. When you're on Wall Street, you -- I remember Billy Blanks once told me, I can do everyone's job better than they can. Well, that's an arrogant statement, but if you think of it, I think I can too and the people that work for me, right? You grow up and you mentor them and Crypto is very different. A lot of the knowledge is coming and the innovation is coming from a very young party or firm. And so managing is complicated, but it's fun.

Listen, what a great pleasure. Thanks so much for being here. I think we're just out of time, but thanks, everybody.

Thank you.