Anyone presuming that investing in crypto is a hedge against the vagaries of the financial cycle has had their assumptions challenged by the close correlation between Bitcoin and the Nasdaq. And anyone supposing that a move into crypto will insulate their bonus from the pain likely in 2022 might want to have a very long look at the newly-released first quarter results from crypto investment bank, Galaxy Digital.
Galaxy Digital said today its spending on compensation (including base compensation, accrued bonuses, placement fees, payroll taxes, benefits, consultants and temporary staff) fell 57% year-on-year in the first quarter as a result of "a lower bonus accrual." The implication is that bonuses have fallen to almost nothing.
Matters are made worse by the fact that Galaxy Digital spent the past 12 months doing quite a bit of hiring. In the first quarter of 2021, it had 172 staff. By the first quarter of 2022, this was up to 367 people. Spending on pay plummeted while headcount more than doubled.
Alongside cash bonuses, Galaxy Digital also pays employees in stock. Equity-based compensation increased last year, but not by enough to offset the drop in other categories of payment.
As the chart below shows, the upshot is that when stock and cash payments are included, average pay per head at Galaxy Digital in the first quarter of 2022 was $172k. In the first quarter of 2021 it was $593k.
Pay is not equally distributed: 12 key individuals shared $14m of the pay pool. However, they too have had a big pay cut: Galaxy paid 11 key people $33m last year.
Last year, Galaxy Digital front-loaded its compensation spending and then added staff as the year progressed, meaning that the individual average fell (confusingly) throughout the year. However, it's clear that the overall direction of pay is looking painful.
As pay is crimped there are signs, too, that Galaxy Digital may be slowing hiring: it only added five people in the past quarter. In 2021, headcount went from 157 people to 352 people over the year.
The hiring and pay squeeze appear to have been precipitated by some challenging times. Today's results also revealed that Galaxy Digital, which offers everything from crypto trading and asset management to mining and crypto M&A, made a loss of $112m in the first quarter of 2022 compared to a profit of $858m last year. This was ascribed to "large digital asset price declines."
Photo by Art Rachen on Unsplash
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