Digital Development Research Report: Understand Galaxy Digital's encryption asset management in one article

Author: Zhang Feng

In the wave of cryptocurrency assets moving from the fringes to the mainstream, Galaxy Digital has gradually grown into an important bridge connecting traditional finance and the digital asset world. Founded by former Goldman Sachs partner Michael Novogratz, this company occupies a unique position in the crypto asset management field due to its unique "Wall Street DNA" and full-stack service model. This article will delve into the fundamental model of Galaxy Digital's crypto asset management from multiple perspectives.

1. The Crypto Evolution of Wall Street's Traditional Financial DNA

The establishment of Galaxy Digital was not a coincidence, but rather a strategic layout by traditional financial elites who have a deep understanding of blockchain technology. Founder Michael Novogratz, as a typical representative of "Wall Street manufacturing," worked at Goldman Sachs for 11 years and became a partner in fixed income, before joining Fortress Investment Group to lead macro strategy investments. This experience allowed him to accumulate unique insights spanning macro trading, asset allocation, and national policy, laying a solid foundation for building his future crypto financial empire.

After leaving the traditional investment sector in 2015, Novogratz began to seriously examine Bitcoin and the financial logic behind it. He keenly identified a systemic gap - "the liquidity in the crypto world is increasing, but there is no structure." The complete chain of asset management, market making, clearing, and ETF custody that exists in traditional finance is almost nonexistent in the crypto world. This is precisely the "institutional void" that Galaxy Digital aims to fill.

In 2018, Novogratz invested $350 million out of his own pocket and successfully went public through a reverse merger with the Canadian shell company Bradmer Pharmaceuticals, creating the first full-stack crypto financial platform aimed at institutional clients. This company was designed as the "Wall Street version of an on-chain investment bank," with a service list comparable to Goldman Sachs, trading structures comparable to Citadel, and compliance paths comparable to Deloitte and Ernst & Young.

After nearly four years of effort, Galaxy Digital finally completed its transition from the Canadian exchange to Nasdaq in May 2025, bringing unprecedented institutional credibility to crypto asset management. This shift occurred after the revision of FASB accounting standards, allowing companies to report crypto assets at "fair value," which completely opened up the channel for "compliant holding of cryptocurrencies."

2. One-stop Cryptocurrency Financial Service Platform

Galaxy Digital's core strategy is to build a one-stop institutional platform covering the entire lifecycle of crypto assets, providing institutional clients and high-net-worth individuals with services that match the professional standards of the traditional financial world. This strategic positioning stems from Novogratz's insight into the core pain points of the crypto industry—institutional investors need not only investment channels but also a complete set of financial infrastructure including compliance, custody, and risk control.

(1) Three Core Business Segments

Galaxy Digital's business structure mainly revolves around three core segments:

Global Markets Division: Covers trading and investment banking, providing liquidity solutions for institutions. In the second quarter of 2025, the institutional loan accounts managed by this division grew by 27% to $1.1 billion, demonstrating strong demand for its credit products.

Asset Management Business: Designed cryptocurrency asset investment products for clients with different needs. By the first half of 2025, its asset management scale is expected to reach nearly $9 billion.

Digital Infrastructure Solutions: Including mining, staking protocol support, and self-custody technology. Currently, the staking asset scale of Galaxy has reached $3.15 billion.

(2) Full Value Chain Integration Model

Galaxy Digital's value chain construction path reflects its strategic thinking: In the upstream (asset generation/acquisition) segment, the company acquires assets through Bitcoin mining, venture capital, and market-making activities; in the midstream (infrastructure and services) segment, it offers services such as centralized trading, over-the-counter trading, and institutional-level custody; in the downstream (investment management/exits) segment, it provides both active and passive cryptocurrency asset funds as well as wealth management services.

This full industry chain layout enables Galaxy to capture the value of cryptocurrency assets across all stages from production to circulation, while also providing customers with a seamless connection experience. For example, when a publicly listed company decides to allocate cryptocurrency assets, Galaxy can not only provide OTC trading services but also handle asset custody, compliance disclosure, and even staking yield optimization, forming a complete service loop.

3. From Bitcoin to a Diverse Ecological System of Cryptographic Assets

In terms of asset selection, Galaxy Digital has adopted a progressive diversification strategy, gradually expanding from an early focus on Bitcoin to covering the entire crypto ecosystem.

In the early stages, Galaxy primarily followed Michael Saylor's Bitcoin-centric model, which aligned with Novogratz's recognition of Bitcoin's "digital gold" properties. However, as the industry evolved, Galaxy gradually incorporated Ethereum, Solana, and other niche cryptocurrencies into its asset allocation.

This diversified strategy is particularly evident among the "crypto treasury" clients of Galaxy services. For example, Galaxy has signed an asset management agreement with SharpLink Gaming, specifically responsible for managing its Ethereum treasury. At the same time, Galaxy itself holds a large amount of Bitcoin and Ethereum, having $1.27 billion in digital assets on its balance sheet as of the second quarter of 2025, mainly consisting of BTC and ETH.

In the innovative asset category, Galaxy has also demonstrated keen layout awareness. The company actively promotes the application for Solana spot ETFs and participates in investments in emerging asset categories such as Memecoins and LSDs. This reflects Galaxy's strategy of balancing mainstream and innovative asset selection—ensuring stability through mainstream assets while moderately allocating to innovative assets to capture cutting-edge opportunities in the industry.

4. Institutional-level Technology and Operational Architecture Model

One of the core advantages of Galaxy Digital in crypto asset management is its institutional-grade technology platform and professional operational structure. The company primarily serves two types of corporate treasury participants: For self-managed enterprises, Galaxy provides an institutional-grade technology platform, enabling them to conduct trading, lending, and staking operations independently; while for enterprises seeking custodial management, comprehensive management strategies and infrastructure support can be obtained through Galaxy Asset Management.

Technical System: Self-developed Trading and Risk Control Platform. Galaxy has developed its own trading system, supporting proprietary trading as well as client services. This system is considered the core competitive advantage of the company. Compared to the trading systems of traditional financial institutions, Galaxy's self-developed system not only has lower costs but is also better suited to the trading characteristics of digital currencies.

The platform integrates multiple modules such as price discovery, quotation systems, and custodial services, and can connect with clients' digital asset wallets to form a complete trading loop. By 2025, Galaxy has established over 150 institutional trading counterparties and is continuously expanding this network.

OTC Trading and Large Asset Handling Capability. Galaxy Digital has demonstrated exceptional capabilities in the OTC trading field, especially in minimizing market impact when handling large transactions. In July 2025, Galaxy successfully settled 80,000 bitcoins (worth approximately $9 billion) without causing significant market fluctuations, fully proving its trading execution capabilities.

This capability stems from Galaxy's powerful liquidity network and rich trading experience. The company can not only provide block trading and risk hedging services but also avoid market panic selling through its dark pool trading system. For institutional clients, this low-impact trading capability is extremely valuable and is also a core advantage that distinguishes Galaxy from ordinary exchanges.

5. Composite Structure of Multiple Income Sources

Galaxy Digital has built a stable income structure through diversified profit models, reducing dependence on a single business. Its profit sources mainly include the following parts:

Management Fee Income. Galaxy charges asset management fees to partner companies, providing them with a continuous stream of recurring revenue. According to SEC filings, for example, in the agreement with SharpLink, Galaxy charges tiered asset management fees ranging from 0.25% to 1.25% per year, with a minimum of $1.25 million annually. Currently, Galaxy collaborates with over 20 cryptocurrency investment firms, managing approximately $2 billion in assets, creating "a continuous stream of recurring income."

Trading and Market Making Revenue. While trading is the main source of income for Galaxy (contributing about 99% of the company's total revenue of $42.6 billion in 2024), the profit margin is extremely low, at only 0.15%. This business primarily serves as a gateway to create opportunities for the company's other high-margin businesses.

Strategic Investment Returns. Galaxy achieves strategic investment returns through its asset division. In the second quarter of 2025, this division generated $198 million in revenue. Unlike Michael Saylor's "buy and hold" strategy, Galaxy strategically sells assets at opportune times to realize actual profits.

Table: Analysis of Major Revenue Sources for Galaxy Digital in Q2 2025

Emerging Business Revenue. As the business expands, Galaxy is developing new sources of revenue from the AI infrastructure sector. The company has signed a 15-year contract with CoreWeave, which is expected to generate an average annual revenue of over $1 billion in three phases starting in the first half of 2026, with a profit margin of 90%. This long-term contract with a high profit margin will provide Galaxy with a more stable cash flow.

6. Risk Management Combining Traditional Financial Risk Control and Crypto Innovation

As a bridge connecting traditional finance and the crypto world, Galaxy Digital has established a risk management framework that integrates traditional financial risk control experience with the characteristics of the crypto industry.

Market Risk Management. Galaxy manages market risk through diversified trading strategies. The company employs a multi-faceted, multi-directional, and multi-product trading approach, which decouples its revenue from the price trends of digital currencies to a certain extent. Even during market downturns, it can generate income through market making, lending, and other services.

For the assets it manages, Galaxy adopts an active risk management strategy, including setting risk limits, conducting regular stress tests, and dynamically adjusting positions. This active management style contrasts sharply with the "buy and hold" strategy of many crypto-native institutions.

Liquidity Risk Management. Galaxy places a high priority on liquidity risk, maintaining a large reserve of cash and stablecoins. As of the first quarter of 2025, the company holds $1.1 billion in cash and stablecoins, along with $1.9 billion in equity reserves. This provides ample buffer space during periods of market volatility.

Counterparty risk control. In selecting counterparties, Galaxy implements strict standards. The company requires all counterparties and clients to undergo a six-step review process, strictly adhering to anti-money laundering regulations. As of 2021, Galaxy has over 150 counterparties, and this network continues to expand.

VII. Building a Compliance Foundation for Institutional Trust

Compliance is a core advantage that distinguishes Galaxy Digital from many native crypto companies, and it is also key to attracting institutional clients.

Proactively Embracing Regulation. Galaxy adopts a strategy of proactively embracing regulation, rather than trying to evade it like many crypto enterprises. The company completed its restructuring from the Cayman Islands to the U.S. with the SEC, officially listing on NASDAQ. Although this process went through nine rounds of feedback from the SEC and involved over $25 million in compliance investment, it has brought institutional-level credibility to Galaxy.

Policy influence capability at the board level. Galaxy has built a strong policy network at the board level, which gives it a rare "policy influence capability" among crypto companies. Board members include Tyler Williams, who previously served as Deputy Assistant Secretary of the U.S. Department of the Treasury, and Doug Deason, a powerful real estate and energy lobbyist in Texas. These personnel arrangements provide an important bridge for Galaxy to communicate with regulatory agencies.

Innovative Compliance Solutions. In response to the financial reporting challenges faced by enterprises in configuring cryptocurrency assets, Galaxy has developed a comprehensive compliance solution. The company assists clients in addressing asset accounting issues under FASB accounting standards, enabling cryptocurrency assets to be legally incorporated into financial statements. This "compliance electrification" service has become a key asset for Galaxy in attracting enterprise clients.

8. Strategic Transformation towards AI Infrastructure

In response to the cyclical characteristics of the cryptocurrency industry, Galaxy Digital is actively promoting a strategic transformation towards AI infrastructure to optimize its business structure and enhance revenue stability.

In 2025, Galaxy announced a 15-year main lease agreement with AI supercomputing service provider CoreWeave, covering the total approved power of 800 megawatts for its Helios data center. This collaboration is expected to bring an annual recurring revenue stream of approximately $720 million and an EBITDA profit margin of 90%.

Galaxy has a potential capacity of 3.5 gigawatts in the Helios Park in Texas, placing it in a favorable position in the constrained AI infrastructure market. If this transformation is successful, it will help Galaxy transition from a cyclical cryptocurrency trading company to a stable infrastructure operator.

Galaxy Digital's cryptocurrency asset management model is essentially a practice of structuralist philosophy—it does not develop independently outside the existing crypto ecosystem, but rather becomes a necessary connection point between the traditional financial structure and the world of cryptocurrency by embedding itself in the gaps between the two.

This positioning allows Galaxy to enjoy the growth dividends brought by innovations in the crypto industry while also obtaining stable income by providing a compliance framework familiar to traditional financial institutions. As crypto assets become further institutionalized, Galaxy's model, which combines Wall Street genes with crypto thinking, is likely to become an important channel for traditional capital to enter the world of digital assets.

However, Galaxy also faces numerous challenges: the strong cyclicality of the cryptocurrency market, the uncertainty of the regulatory environment, and the execution risks associated with transitioning to AI infrastructure. Whether it can balance the relationship between traditional business and innovative business, cyclical business and stable business will determine the future development space of Galaxy Digital.

Ultimately, the success of Galaxy Digital is not just about one company, but serves as an important litmus test for whether traditional finance and the crypto world can effectively integrate. Its practices will provide valuable references for the entire industry, and regardless of the outcome, it has profoundly influenced the evolution path of crypto asset management.