Institutional Investors Lose Out Too, Contrary to Popular Belief

KEY TAKEAWAYS 

  • Institutional investors don’t necessarily perform better than amateurs.
  • Galaxy Digital suffered enormous crypto trading losses, up to 96% in WAX trading.
  • Galaxy Digital lost 88% of its investments in the Pantera ICO Fund.

Amateur investors tend to believe that institutional investors can manipulate the crypto market and win a big pot. Little do they know that these big players could also get slaughtered in this market. While most only report to their limited partners, there is a listed asset management firm who lifted the veil on the performance of institutional investors.  

Galaxy Digital is founded by billionaire businessman and former Goldman Sachs partner, Michael Novogratz. In January 2018, Novogratz contributed his digital assets portfolio and related investments to Galaxy LP, which, at its time, had a valuation of approximately USD 302 million. 

The company’s scope of business covers four main areas, namely digital assets trading, asset management, principal investment, and advisory. From the company’s reports, it seems that Galaxy Digital does not excel at either trading or investment. Apart from 18Q2, 19Q1, and 19Q2, Galaxy Digital’s quarterly results were consistently in the red. 

In terms of digital assets trading, the company disposed of 1,226 BTC in 20Q1, contributing to most of the realized trading losses of USD 38.2 million. 

Source: Galaxy Digital, Bybit Insight

The USD stablecoin holding, in USDC and USDT, doubled from USD5.98 million as of 19Q4 to USD12.8 million as of 20Q1. The figures are in line with Silvergate’s disclosure of increased USD holding by crypto investors in 20Q1, propelled by the market crash in mid-March.  

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Source: Galaxy Digital, Bybit Insight
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Source: Galaxy Digital, Bybit Insight

In the investment space, Galaxy’s investment arm poured USD 17.4 million into the Pantera ICO Fund, which turned a loss of 88%, while investments into Xapo’s preferred stock, approximately USD13.8 million, was down by 70%. Galaxy Digital invested USD 50 million into WAX in 2019 and ended up with a 96% loss.

Despite the streak of losses, the company also made some successful investments, such as the investment into BlockFi’s preferred stock, approximately USD 3.7 million, generating a 283% gain, the USD 0.9 million investment into Cryptology, posting a gain of 902%, and the USD 0.5 million investment into NuCypher’s Pre-ICO with 852% gain.  Unfortunately, these investments were of much smaller sizes.

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Source: Galaxy Digital, Bybit Insight

If we compare the fair value of Galaxy Digital’s fund investments, it’s not difficult to tell that in 20Q1, Blockchain Capital IV Fund was down by 18%, Pantera Venture Fund II down by 10.7% and Pantera ICO Fund by 6.2%. Pantera’s ICO Fund, raised during the ICO bubble in 2017, lost 88% of its value by the end of 20Q1. 

The track records of Galaxy Digital and most of the institutional funds it invested in are no better than the performances of amateur investors. On the bright side, the crypto market is not as easily manipulated by large institutions as conspiracy theories suggest.