DCG Could Be Worth Over $4 billion Should They Go Public

The investable universe of publicly-traded crypto companies is quite limited. There are a handful of small-cap mining companies, a few investment managers, and one large payment processor that generates a small portion of its profit from Bitcoin sales. To date, none of the multi-billion dollar crypto startups that are category leaders in their respective sectors have tapped the public markets. However, it’s only a matter of time before crypto industry leaders like Coinbase and BlockFi want to scale their business via a public offering. Once this happens, it could be crypto’s Netscape moment where one high profile IPO kicks off a frenzy of subsequent offerings fueling investor frenzy to gain exposure to the nascent, but rapidly growing industry.

So far there have been talks about Coinbase and BlockFi going public, but there’s a third possibility that may also be in the running. Digital Currency Group (DCG) has been around for over 5 years and is involved in nearly every facet of the industry. They’ve built several established businesses that continue to dominate their respective sectors. With this rapid growth, it wouldn’t be surprising to see them consider going public, whether as a whole through an IPO or one of the subsidiaries individually through a SPAC.

If this were to happen, all eyes – and investment banking analyst excel spreadsheets – would be on the valuation DCG may fetch as it would serve as a bellwether for subsequent crypto companies. Using information from its quarterly updates along with other publicly available data enables us to arrive at a rough approximation for its public valuation.

Core Business Lines

DCG was founded in 2015 by Barry Silbert after he sold his prior company, Secondmarket, to Nasdaq. It acted as a holding company for two businesses under the SecondMarket holding company that were combined with several of Barry’s seed investments. The two main business lines were Genesis Global Trading, an over-the-counter bitcoin trading desk, and Grayscale, an asset manager providing a publicly-traded bitcoin investment vehicle (GBTC). Since then, DCG has grown these companies to be industry leaders, diversifying their services as well as adding new companies to the DCG umbrella. Below is a back of the napkin sum-of-the-parts valuation for these individual pieces allowing us to arrive at a final valuation for DCG.

Genesis

Last week, Genesis released its Q3 report that once again outlined record-breaking growth across its various segments. Loans originated surpassed $5 billion, more than double the previous record from Q2 of $2.2 billion. This brings their total active loans to $2.1 billion which at an estimated 2% net interest margin, implies a run-rate annual revenue of $42 million for their lending segment.