On February 3, 2026, Galaxy Digital announced its Q4 2025 and full-year financial report, simultaneously disclosing the completion of a total financing of $1.625 billion, a significant blow during a weak cycle. The financial report showed that the company recorded a $482 million net loss in Q4 2025 and a full-year net loss of $241 million. In sharp contrast, it is still accelerating the expansion of data centers, increasing power capacity to 1.6GW, assets under management (AUM) rising to $12 billion, and maintaining a cash reserve of $2.6 billion, providing resilience. This combination of “paper losses + leveraged financing + large-scale infrastructure expansion” raises a core question: Is Galaxy out of balance due to losses, or is it positioning itself for the next bull market? The full text will narrate around the key figures in the financial report, the structure of convertible note financing, and the layout of data centers, attempting to outline the logic and risk-return profile behind Galaxy's gamble-like strategy.
The $482 Million Paper Black Hole in a Plummeting Cycle
● Loss magnitude and expectation gap: In Q4 2025, Galaxy recorded a $482 million net loss, which was about $282 million “worse than expected” compared to the market's prior loss expectation of roughly $200 million. For the full year, the company reported a net loss of $241 million, of which about $160 million was classified as one-time costs, covering restructuring, asset impairment, and some transaction-related expenses. This means that a significant portion of the apparent “annual loss” comes from non-recurring items rather than a single quarter's operational collapse.
● Plummeting prices amplify balance sheet wounds: Q4 2025 fell within a time window of significant declines in the cryptocurrency market, with leading asset prices deeply retracing, leading to concentrated unrealized losses and impairments in self-owned positions, held investments, and some derivative positions directly linked to market prices. For a crypto financial group highly sensitive to asset prices, price declines can be magnified on the income statement, making “paper losses” far exceed the actual operational pressure under similar business activities. Galaxy's Q4 performance is a typical reflection of this cycle's amplification effect.
● Separation of accounting losses and operational capability: In the financial report, Galaxy disclosed an adjusted gross profit of $426 million, a figure derived from a single source and still pending further verification, but at least it signals that, after excluding some market value fluctuations and one-time items, its core business profitability is not entirely stalled. The market is attempting to redraw lines between “accounting losses” and “operating cash flow” to determine whether Galaxy is suffering from the cycle or if its own model is failing.
● Relative position amid industry-wide losses: The plummet in Q4 2025 caused the entire crypto finance and trading services sector to generally fall into a loss state, with several peers also recording significant impairments and asset revaluations. From this industry backdrop, Galaxy's balance sheet performance is not an “isolated disaster,” but rather situated within a typical range for a high-volatility asset management platform. The market's tolerance for such losses increasingly depends on whether the company has a sufficiently robust balance sheet and verifiable profit leverage, rather than the red and black numbers of a single quarter.
$2.6 Billion Cash and $12 Billion AUM as Survival Buffer
● Bullet reserves in a bear market: Behind the massive losses on the balance sheet, Galaxy still disclosed holding $2.6 billion in cash reserves and managing approximately $12 billion in assets (AUM). This scale places it among the leaders in the crypto finance sector, providing a relatively ample firewall in a highly volatile environment. Cash positions not only imply lower short-term liquidity risk but also give the company room to act counter-cyclically, acquiring assets and deploying infrastructure during price declines.
● The tug of asset management fees and capital outflows: In a bear market environment, the asset management business faces multiple pressures, including reduced management fee rates, significant shrinkage of performance fees, and even capital redemptions. Galaxy's $12 billion AUM brings relatively stable base management fee income on the books, buffering the volatility of self-owned portions; however, if market sentiment further deteriorates, capital outflows could amplify scale contractions and transmit pressure back to profitability and valuation models, making this seemingly “stable” income source less secure.
● How cash supports aggressive strategies: The ample $2.6 billion in cash provides Galaxy with ammunition to maintain proprietary trading positions, engage in mergers and acquisitions in undervalued areas, and continue investing in computing power and heavy asset infrastructure like data centers. While many peers choose a defensive posture of “shrinking balance sheets and reducing leverage,” Galaxy's cash buffer becomes a crucial premise for its willingness to expand counter-cyclically, also enhancing its bargaining power and asset acquisition capabilities during industry reshuffling.
● Balance sheet resilience and valuation divergence: For secondary markets and potential creditors, how to weigh “short-term losses” against “balance sheet resilience” becomes key to understanding Galaxy's value. Some investors view the $2.6 billion in cash and $12 billion AUM as a foundation to hedge against volatility, providing visible support for future valuation recovery; others, more conservatively, worry that if such buffers continue to be invested in high-risk expansions and heavy asset construction, once the cycle's turning point is delayed, the “safety net” on the books will be quickly consumed, triggering new credit and valuation repricing.
The Structural Chip of $1.625 Billion Convertible Notes
● Nature and signal of financing tools: The $1.625 billion financing completed by Galaxy primarily utilizes convertible notes, a commonly used structural tool in traditional financial markets that allows holders to convert into equity under specific future conditions. For crypto-native enterprises, introducing such structures means actively connecting with the pricing and constraint mechanisms of traditional capital markets, while retaining a degree of leverage flexibility, sending a signal of “institutionalized and priceable” to the outside world.
● Debt-oriented considerations in a bear market: In the context of the Q4 2025 plummet and the generally pressured market environment, Galaxy chose to supplement its ammunition with debt-heavy convertible notes rather than purely equity financing. The considerations behind this include: first, to alleviate the dilution pressure on existing shareholders from current equity financing, avoiding “selling equity at a low valuation”; second, to achieve a more refined balance between financing costs and capital structure through a combination of interest costs and potential conversion rights, reserving “expensive equity” for a better valuation environment in the future.
● Enhancing balance sheet flexibility: Convertible notes demonstrate strong flexibility in a bear market—the issuer can quickly obtain substantial cash supplements, while whether to convert into equity and at what price is deeply tied to the company's market performance and cycle position. For Galaxy, this structure currently manifests more as an expansion of liabilities, but simultaneously reserves space for “equity-izing” debt and compressing leverage during future valuation recovery, thus forming a buffer zone in terms of time and structure on the balance sheet.
● The narrative of “preparing for the next cycle”: Galaxy founder Michael Novogratz was quoted as saying, “We are strengthening the balance sheet through structural financing to prepare for the next cycle,” a statement that remains to be verified. Nevertheless, this narrative logic aligns closely with the practical function of convertible notes: locking in long-term funds during the winter, exchanging for stronger cash and credit flexibility in the short term, aiming to enjoy asset revaluation gains in the next bull market while converting some debt into equity, thereby amplifying shareholder returns.
1.6GW Data Center Expansion and Betting on Computing Power Transformation
● Scale of power and computing power: Galaxy disclosed that its data center power capacity has expanded to 1.6GW, positioning it as a significant player in the competition for crypto and AI computing infrastructure in North America. 1.6GW not only signifies the physical foundation to support large-scale computing clusters but also gives Galaxy leverage to negotiate with traditional cloud computing, hosting service providers, and other crypto mining giants by presenting “hard assets.”
● Business migration from mining to computing power services: Compared to the past single model centered on Bitcoin mining, Galaxy is attempting to transform the power and facility resources originally serving the mining business into broader computing power service capabilities, catering to diverse needs including AI training, inference, and general high-performance computing. The essence of this transformation logic is to shift crypto-native enterprises from a single “price leverage” to a cash flow logic of “computing power and infrastructure leasing,” reshaping their damaged curves and profit paths during the cycle.
● Locking in future cash flow through the AI wave: In the macro context of the North American data center competition and the surge in AI computing power demand, Galaxy is clearly not satisfied with merely being a “crypto trading and asset management platform,” but hopes to leverage data centers and power resources to preemptively position itself in the potentially expanding computing power leasing market in the coming years. For Galaxy, such infrastructure projects require heavy investment and have extended payback periods, but once long-term computing power or hosting contracts are signed, there is an opportunity to present smoother, more predictable cash flows in financial reports, complementing the highly volatile trading and investment returns.
● Helios and the reconstruction of valuation logic: Some analysts have suggested that “the $1 billion annual revenue expectation from the Helios data center will reshape valuation logic,” a judgment currently marked as to be verified information and should not be extended to specific forecast numbers. Even without discussing specific amounts, the core reflected in this viewpoint is that the capital market is attempting to reassess Galaxy's long-term value through “data centers and computing power businesses,” migrating part of it from a purely crypto finance valuation framework to a hybrid model with technology infrastructure attributes.
Massive Losses, Expansion, and Valuation Game: The Tug of Market Narratives
● Emotional trajectory post-financial report release: In the face of a financial report combining “Q4 massive losses + significant annual one-time costs + aggressive expansion of data centers and financing,” the market's short-term reaction often first focuses on the $482 million quarterly net loss and the negative shock of “$282 million worse than expected,” leading to an instant compression of emotions and valuations. Subsequently, as more investors digest information such as the $2.6 billion cash, $12 billion AUM, and 1.6GW computing power expansion, perspectives may gradually shift towards re-evaluating assets and infrastructure layouts, forming a curve of “short pain and long debate.”
● Contrast between defensive shrinking and counter-cyclical expansion: In the same bear market and price plummet, some crypto financial service institutions choose to shrink their balance sheets, reduce proprietary scale, and delay capital expenditures to seek survival certainty through the winter; Galaxy, on the other hand, continues to push for data center expansion and structural financing while facing increased paper losses, forming a stark contrast with the conservative strategies of its peers. This is seen as both an offensive signal of “daring to gamble on the next cycle” and interpreted by some as a test of risk tolerance and management judgment limits.
● Reconstruction of valuation models: For investors, evaluating Galaxy now requires more than simply applying the traditional crypto finance valuation logic of “management fees + proprietary earnings multiples”; it must also incorporate multiple dimensions such as short-term losses, cash reserves, convertible note structures, and the prospects of data center and computing power businesses. Different investors will assign different weights to these factors: some place greater emphasis on the safety margin of the balance sheet and the long-term potential cash flow of computing power infrastructure, while others maintain a highly cautious attitude towards debt leverage and expansion pace, leading to further widening of market discrepancies regarding reasonable valuation ranges.
● Polarization of success and failure narratives: If the market cycle reverses in the coming years, cryptocurrency asset prices recover strongly, and the demand for computing power in fields like AI continues to grow, Galaxy's $1.625 billion structural financing leverage and its gamble on the 1.6GW data center and related infrastructure may be rewritten as a “decisive move at the bottom of the cycle,” bringing it excess returns and an elevation in industry discourse power. Conversely, if the cycle reversal is delayed or insufficient in strength, and the computing power business fails to deliver expected cash flows, this round of expansion may be viewed as “buying the heaviest assets at the most expensive point,” becoming one of the most costly and textbook examples of failure in this cycle.
Finding the Balance Point for the Next Cycle Between Losses and Gambles
Galaxy's current situation can be summarized as: massive paper losses + large-scale infrastructure expansion + structural financing leverage combined, forming a high-risk, high-resilience profile. The $482 million loss in Q4, $241 million annual loss, and $1.625 billion in convertible note financing collectively shape a profile that is under pressure on the balance sheet yet still aggressively leaning forward. This posture reserves upward space for amplifying returns in the next cycle while also exponentially increasing the difficulty of survival during the winter period.
The extension of such crypto financial groups into computing power and data center infrastructure is gradually blurring the boundaries between traditional finance, crypto trading, and technology infrastructure. Galaxy, which started by managing $12 billion in assets and proprietary trading, increasingly resembles a hybrid entity: it is both an asset manager and a trading counterparty, as well as a heavy asset operator of computing power and data centers. For the entire industry, this cross-boundary layout may become a new paradigm, redefining the meaning and risk profile of “crypto financial groups.”
For investors, assessing Galaxy and its peers requires a new framework of thought: not only should current profits and losses be considered, but also the scale of its cyclical gambles and the matching of its asset base. The key lies in determining whether the existing $2.6 billion in cash, $12 billion AUM, and 1.6GW data center infrastructure are sufficient to support it through a potentially longer and more complex bear market, and how much real cash flow these assets can release in different cyclical scenarios, rather than merely remaining at the narrative level.
If in the coming years the crypto market sees a strong reversal, institutional funds return, and the demand for computing power from AI and high-performance computing continues to materialize, Galaxy's approach of “leveraging losses and expanding infrastructure in a bear market” may become a template and textbook for the industry to emulate; however, if the cycle does not meet expectations and the computing power economy fails to develop as scripted, today’s gamble may be written into another version of the textbook—as the most expensive lesson of this cycle, reminding future participants to carefully assess how much time and leverage risk they can bear while chasing the next cycle's dividends.
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