TL;DR
- Crypto firms remain highly dependent on Bitcoin’s price for revenue, a link that may persist for 3–4 more years.
- Galaxy Digital is expanding into data centers to create more stable, non-correlated income streams.
- Novogratz sees a potential “pain trade” to the upside in 2026, buoyed by Fed rate cuts and growing infrastructure.
Michael Novogratz, founder and CEO of Galaxy Digital, states plainly: crypto companies remain tied to the Bitcoin price and likely keep that link for three to four more years. He explains how asset management, staking, and trading earn fees as a percentage of token value, so a 30% drop in BTC often cuts revenue by a similar margin. Even with zero coins on a balance sheet, a firm still feels the blow: staking rewards shrink, trading slows, and management fees contract when market capitalization retreats.
He contrasts crypto with traditional finance. Banks, insurers, and payment processors rely on broader, steadier fee pools. In digital assets, beta to spot prices remains high across the stack: institutional flows, spot and derivatives turnover, and prime services all expand when BTC rallies and compress when it fades. For operators, pricing power and throughput still hinge on market direction.
Galaxy moves to dampen volatility by growing data centers and infrastructure
Novogratz notes data center operations now rival, or even exceed, the crypto segment in implied market value. Infrastructure follows different cycles, requires distinct capex, and runs on capacity contracts that smooth cash flows. With enough scale, leadership could separate infrastructure from core crypto services; the board continues to evaluate options.
Macro lens and 2026 setup
Novogratz avoids a bearish stance. He points to soft performance in crypto versus gold and silver, both leaders during the year. A Federal Reserve pivot toward rate cuts could weaken the dollar and lift risk assets, crypto included. He flags a potential “pain trade” on the upside: a decisive break above key technical levels might flip sentiment quickly. He also cites expanding custody, growing institutional access, and ongoing build-out of infrastructure as tailwinds into 2026.
Operating playbook for crypto firms
- Manage beta: align costs to price cycles, diversify fee lines, and automate hedges for treasury and inventory.
- Pursue non-directional income: market making with risk limits, SLA-backed custody, connectivity and data for 24/7 markets.
- Prioritize infrastructure: power, cooling, hosting contracts, and availability commitments that support cash generation during sideways phases.
- Tight governance: disciplined capex, prudent capital structure, and exposure limits by asset and client.
Crypto businesses still track Bitcoin
Dependence should fade gradually as infrastructure scales, revenue sources broaden, and demand for price-agnostic services deepens. Until then, risk control, diversified cash flow, and clean execution will separate firms that endure from firms that stall.
