REUTERS/Eduardo Munoz Michael Novogratz speaks at the Sohn Investment Conference in New York, May 5, 2014.
- Galaxy Digital, founded by bitcoin king Michael Novogratz, is raising at least $250 million for a credit fund to offer loans to cryptocurrency firms, according to people familiar with the matter.
- Borrowers will be able to get a loan by using cryptocurrencies, buildings, and cryptocurrency mining machines as collateral.
- Galaxy has been lending to crypto firms on its balance sheet since last year, and it has seen growing demand from borrowers amid the downturn in cryptocurrency.
Galaxy Digital, the crypto bank founded by former Goldman Sachs partner Michael Novogratz, is raising at least $250 million for a credit fund to offer US dollar loans to crypto firms, according to people familiar with the matter.
Galaxy will be offering loans to crypto companies and asking for cryptocurrency assets, properties, and even machines that mine cryptocurrencies as collateral. The firm will close a first round of fundraising in March, two of the people said.
Novogratz's firm already lends to crypto businesses using its own balance sheet. It's also backed crypto lending startups through its investment firm Galaxy Digital Ventures, leading a $52.5 million fundraise for New York-based startup BlockFi last year.
Sign up here for our weekly newsletter Wall Street Insider, a behind-the-scenes look at the stories dominating banking, business, and big deals.
But demand from borrowers has grown so much that Galaxy now wants to launch its own fund, two of the people said. It will be run out of Galaxy's asset management arm.
A spokeswoman for Galaxy declined to comment on the fund.
With the cryptomarket in free-fall since 2018 - bitcoin has fallen more than 80% since last year - an increasing number of crypto firms are looking for funding. Crypto miners, who rely on high crypto prices to maintain profitability, were among those hit the hardest. These firms may now face a customer exodus and lower mining profits. Many startups that raised funding through digital coins are also suffering as they couldn't raise additional funding while the price fall crushed the value of their holdings.
Lenders to these companies, in turn, are seeing a spike in demand.
BlockFi, which launched its first crypto-backed lending product in 2018, has seen its revenues grow 10-fold since June, according to Zac Prince, BlockFi's CEO. The company is planning to offer more products this year, including a savings account where clients can earn interest on their crypto holdings.
Salt Lending, another crypto loan provider, has hired 85 employees to date and is planning to grow the team by 25% in 2019, CEO Bill Sinclair said. Salt Lending had issued $52 million in loans through the end of 2018.
Read more:
- A leading investor at Barry Silbert's bitcoin investment firm shares his top crypto trends for 2019
- 'In our early days, we were really hustlers': The founder of a $75 million crypto fund shares his best advice for aspiring entrepreneurs
- A crypto exchange has poached a venture capital veteran to head up its M&A efforts as crypto deals heat up