Novogratz’s Galaxy Digital Launches Crypto Options Business

News | June 25, 2019 By:

Galaxy Digital, Mike Novogratz’s crypto-focused merchant bank, is reportedly pivoting toward cryptocurrency options contracts.

Media outlet The Block reported that Galaxy Digital has expanded its trading business to offer crypto options contracts in response to increasing demand from institutional investors. The new initiative aims to mitigate the risk of price volatility.

“Cryptocurrency companies like mining firms, lenders, and other projects, including those sitting on treasuries, want to hedge the inherent volatility risk of cryptocurrencies,” Galaxy Digital global head of business development Yoshi Nakamura told The Block. “The firm’s options business is relatively new and appetite for it continues to increase.”

Options are a type of financial derivative that give a buyer the right — but not the obligation — to buy or sell an asset at an agreed price in future. They are designed to serve as strategies for hedging, protection or speculation in different market conditions.

According to Ari Paul, chief investment officer and managing partner of crypto investment firm BlockTower Capital, the demand for crypto options has been increasing, which he said is primarily driven by non-crypto firms.

“Traditional hedge funds love to use options as it helps spread the risk,” Paul said. “These counter-parties are going to be new traditional funds and family offices. I haven’t heard of Polychain, Pantera, etc. being interested in options.”