Billionaire Investor and President of Fortress Investment Group, Mike Novogratz, is leading a $52.5 million fundraising round for a cryptocurrency lending service called BlockFi. The investment is the latest move by the “Bitcoin King” that is solidifying his position as a leader within the expanding cryptocurrency community.
BlockFi: A Modern Take on Collateral Based Borrowing
BlockFi is a New York-based company that offers USD loans using client’s cryptocurrency holdings as collateral. This allows individuals and corporations who don’t want to sell their cryptocurrencies to free up cash while still allowing for increases in their investment’s value. BlockFi holds client’s Bitcoin or Ethereum with a registered custodian throughout the duration of the loan, and returns it once the loan is fully paid off. They explain their mission on their website, saying:
“BlockFi’s mission is to provide liquidity, transparency and efficiency to digital financial markets by creating products that meet the needs of consumers and corporations across the globe. We build bridges between traditional finance and digital markets that enable growth for all participants.”
BlockFi’s services are currently in beta and only available in 35 states, but their already multi-million dollar book of loans is rapidly growing as the service expands into more states and potentially international markets. The service is also looking into accepting more cryptocurrencies for collateral, with their current offering limited to Bitcoin and Ethereum.
Mike Novogratz’s Investment Marks new Opportunity for BlockFi
Novogratz’s investment in BlockFi comes just five months after the company’s first fundraising round of 2018, where the company raised a total of $1.55 million from a variety of companies including Consensus Ventures, SoFi, and Kenetic Capital.
The latest round of funding dwarfs BlockFi’s previous fundraising efforts at $52.5 million, which will give the company a significant amount of latitude to further expand into other states, countries, and add new products in addition to support for other cryptocurrencies.
BlockFi’s founder, Zac Prince, spoke to Business Insider discussing the possibility of other investment products including “fixed-income and debt investments, as well as lines of credit and a credit card.”
In addition to adding support for other investment products, the company is likely to increase their maximum loan amounts. Currently, BlockFi borrowers can borrow a maximum of $250,000 using cryptocurrencies as collateral, which could limit the amount of corporate borrowers interested in using the service.
In an effort to increase the amount of products offered, they brought on the former managing director for Bank of America, Rene van Kesteren, in May. Novogratz spoke of Galaxy Digital’s investment in BlockFi, saying:
“A robust lending market is the keystone for financial systems and BlockFi’s institutional approach and deep lending expertise were key drivers in our decision to partner with them.”
Galaxy Digital and the Future of Investment Banking
The multi-million dollar investment in BlockFi is being made through Novogratz’s merchant bank, Galaxy Digital, which was started with the intention of investing solely in businesses relating to blockchain technologies and digital currencies.
According to Galaxy Bank’s page on Crunchbase, the companies goal is to “to raise primary capital towards building a best-in-class, full service, institutional-quality merchant banking business in the cryptocurrency and blockchain space.”
The company has been making a series of high profile investments throughout 2018, including a recent $15 million one in AlphaPoint, a New York company specializing in building platforms for tokenized assets. Galaxy Digital also recently partnered with Bloomberg to launch a cryptocurrency index.
Specialized investment solutions focusing on cryptocurrency and blockchain technologies are becoming increasingly popular as the space continues to grow and as traditional investment groups shy away from the cutting-edge technologies.
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