Chaos Creates Opportunity
Amid chaos, opportunities often arise, though few recognize this in the moment, and even fewer are willing to invest heavily before things stabilize. Former Goldman Sachs trader Michael Novogratz seized the moment. In December 2022, while the crypto sector was struggling after the downfall of Sam Bankman-Fried’s FTX, Novogratz’s Galaxy Digital invested $65 million to acquire a 160-acre bitcoin mining site in Dickens County, Texas.
“This will likely be my most profitable investment by a significant margin,” stated the 61-year-old Novogratz.
Initially, the timing of the investment seemed questionable; it was a significant influx of capital into mining infrastructure just as the industry was confronting its frailties, following the loss of over $1.5 trillion in digital assets that year. Bitcoin and ether had both plummeted more than 60%.
Earlier in 2022, Galaxy had grown concerned about its investments in crypto-mining chips located in third-party data centers. “We were worried about the capital tied up in assets controlled by individuals with declining credit,” reflected Christopher Ferraro, Galaxy’s president and CIO.
Argo Blockchain provided the necessary deal structure, offering a site named Helios on affordable land with access to low-cost power and a workforce in nearby Lubbock. This complex transaction was a mix of bailout, legal maneuvering, and financial structuring, aimed at preserving the troubled operator long enough to finalize the acquisition.
As the year concluded, Novogratz and his team began to realize that they had acquired a far more significant asset than initially perceived. By late 2023, as bitcoin prices hovered around $38,000, Novogratz investigated whether bitcoin mining was truly the most viable use of the newly acquired asset.
As time passed, others began recognizing the evolving opportunities. In June 2024, Core Scientific announced a $3.5 billion lease with CoreWeave for 12 years, marking a shift in valuation of crypto mining from speculative collateral to essential power infrastructure with stable, long-term revenue. In November 2024, Galaxy secured a 15-year lease agreement with CoreWeave for 25% of Helios’ capacity, leading to plans for expansion and new revenue streams.
