Mike Novogratz’s Galaxy Digital Holdings Ltd. is partnering with Intercontinental Exchange Inc.’s Bakkt unit to offer “white-glove” service for large asset managers looking to buy and store Bitcoin.
“We are talking about multi-billion-dollar asset managers from traditional finance that we are really targeting with this,” Tim Plakas, head of sales at New York-based Galaxy’s over-the-counter trading desk, Galaxy Digital Trading, said in a phone interview.
In the last three months, interest from asset managers in Bitcoin as a store of value has spiked, largely the result of the economic uncertainty caused by the Covid-19 pandemic, Plakas said. Hedge fund manager Paul Tudor Jones said that he is holding some Bitcoin, adding fuel to the fire. Demand on the CME Group’s derivatives exchange has been surging, he said.
“This partnership that we put in place was really in response to demand we’ve been seeing in the last three months from institutions with a capital ‘I,’” said John Conneely, head of custody business development at Bakkt, the crypto trading platform majority owned by ICE, which also owns the New York Stock Exchange. The companies declined to name customers.
While it’s highly volatile, and crashed badly in mid-March, the world’s largest cryptocurrency Bitcoin is up nearly 33% since the beginning of the year. Still, it’s a risky bet, and in May, Goldman Sachs Group Inc. said it doesn’t consider Bitcoin an asset class it would recommend investors get into.
“To be honest, different views exist in any market, that’s what makes the market,” Plakas said.
With the Galaxy-Bakkt partnership, institutional customers will only have to go through signup once to work with both firms. And both partners can jump on a call with a client at the same time, answering questions or following trade directives.
“These sort of participants expect someone 24 hours a day in a Bloomberg chat, or real phones to ring, and they expect someone to pick up,” Plakas said. Galaxy is an investor in Bakkt, and the two companies have collaborated for months, but their services are now more integrated. The partnership is non-exclusive.
Galaxy runs an over-the-counter trading desk which can help funds make large trades, and it handled more than $1 billion in trading volume in the first quarter. Bakkt’s custody business safeguards cryptocurrency for more than 70 institutional clients. Bakkt also runs a derivatives exchange.
The announcement comes amid a rush of companies -- including BitGo and Genesis -- adding new capabilities in order to be known as crypto’s prime brokers, offering a safe, regulated way for institutional clients to wade into this market.
“In the digital-asset space there’s a large push toward offering prime brokerage services that don’t exist in a very mature way,” Plakas said. “These are sort of things that we think about as a firm in terms of the partnerships we develop and offerings that start to go down the prime brokerage-like route.”
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