Good morning, and welcome to this Q2 Presentation for Arcane Crypto. My name is Torbjørn Bull Jenssen, as many of you might know already, and I'm the CEO of Arcane Crypto. Last quarter was a turbulent quarter in the market. The crypto sector went through a financial crisis. Interest rates have been hiked, and the world is now on brink of recession. Energy prices has gone ballistic. Despite this, however, we managed to have stable progression in Arcane. We relocated our mining to Northern Norway to ensure profitability going forward and really benefiting from the low electricity prices. Our fund has managed to maintain its outperformance of Bitcoin, delivering value to our investors in the fund despite the turbulent market.
We continue to see sustained interest in research, with new partnerships, strong user growth on the new platform, and kind of strong progress going forward. We launched the first version of the Invest application just after the quarter. In other words, we are on track. A year ago, we communicated our ambition of unifying our services, bring them into one tech stack, one platform for users to learn, trade, and invest. Earlier this year, we launched the Research application. Now we have launched Invest application, and for the rest of the year, the main focus is on launching the Trade application. Together, these applications will form the core product offering, which we will build on and expand on over time.
The apps you see today are simple but will grow powerful over time as we iterate and improve based on user feedback, and over time, realize the full potential of the cloud infrastructure we're building on, building this into a powerful platform. The really powerful thing of having these applications unified is the fact that there are strong synergies between them. As an example, users might come in because they wanted to invest in the fund but really enjoy the fact that they can read our research to stay up to date. As they do, maybe they want to trade. They hold their long exposures, like, and long-term exposures in the fund, but they start trading with us through our OTC offering, and we already see this. Research has great visibility, and it's a great way to pull users in.
They might start by learning, building trust in the sector, building an understanding, and as they become ready, we will have the financial products, whether they want investment services or trading. There are really strong synergies for the end users, where having the products together adds additional value, but there's also strong synergies from an operational point of view. Take data as an example. We use a lot of data in our trading operation to secure the best possible execution. When we have clients coming with millions of dollars in orders, we need to know how to execute that across different venues to secure a good execution. That data is also useful to Research. When they're writing their market reports, they need that data to understand the structures of the markets, and there's no need for having these two data sets being collected independently.
Rather, we can have a unified operation on collecting this data and then have several different applications internally. Very interestingly, we have started to see users reaching out to us, querying us about our unique data sets. For this reason, we actually anticipate adding an additional service or product, if you like, in the future, a data application, so that users don't only learn by reading our research, but will have the opportunity to dig even deeper by querying the data themselves. This will be a great way for us to monetize the unique data sets that we are building up. Last quarter, we shared a lot of details on the great business opportunity we see in the private wealth segment of the market.
We highlighted how we will focus on solving the problems for high-net-worth individuals and family offices, a client segment that really wants our services but find it hard to get, their crypto exposure covered by other platforms. We have seen this very clearly internally in Arcane. We see it through our investment offering, and we see it through our brokerage, Kaupang, which is kind of tailored for this market segment. It's not only we who see this trend. BCG recently affirmed our observation. In their global wealth report, they highlighted that clients want it, that is cryptocurrencies and exposure to digital assets, but that banks can't advise on it. The banks don't know how. They don't have the products. Same thing for wealth managers. That's what we are bringing. That's where we can have an edge. That's where we can capture, market shares.
BlackRock, the world's largest asset manager, formerly viewing bitcoin as a derivative of money laundering, recently announced that their institutional clients are increasingly interested in gaining exposure to digital assets, and they also announced their partnership with Coinbase, and that they are rolling out the Bitcoin Trust because their clients want it. These are just two examples out of many reaffirming our observation that the private wealth segment is really coming full force into this sector. What we've seen over the last couple of quarters actually is a decline in retail trading volume, while the institutional interest continue to grow, and especially the private wealth continues to come into the market. For Arcane, actually I have a great announcement today of two new partnerships with Refinitiv and Infront for us to distribute our research through their platforms.
Refinitiv is one of the world's largest providers of market data and infrastructure. They are serving 40,000 financial institutions worldwide, with more than 400,000 end users on their platform. By distributing our research through Refinitiv, we make sure that our brand is front and center for the right audience, that they can start building a relationship with Arcane, and really we can reach them on the platform where they are today. Infront has more than 90,000 professional users in Europe, and they offer a powerful combination of market data, research, trading, and portfolio management. The partnership is for us to distribute research through Infront directly to the professional users on Infront.
However, by building up a user base on Infront today, we can actually prompt them tomorrow and inform them once our trading application is live and has been integrated with Infront, so that they can stay within the same ecosystem they're using today, but add crypto trading over time. Infront and Refinitiv is actually just the start of several other potential partnerships for both distribution, but also eventually trading integration. This is really how we can scale long term, really how we can reach millions of users eventually, and especially reach the high net worth and family offices where they are today. In Arcane today, research is our secret sauce. It's our unique advantage that gives us a head start compared to a lot of our competitors. The great thing about research, it really builds trust.
Actually, our research builds trust in the whole industry, and by extension, in Arcane. Fidelity referenced work from our analysts when they sent their application to the SEC for an ETF. The SEC on their, on their side referenced also our work when declining the applications, from, VanEck. We are covered, daily or on a weekly basis in all the tier one financial media, Financial Times, Bloomberg, Forbes, Reuters. We have, subscribers from all of the big investment banks, Morgan Stanley, Goldman Sachs, UBS, JP Morgan, on our distribution lists. Venture capital funds like CapitalG, the venture fund from Alphabet, from Google, reached out to dig deeper when they had read some of our reports. This visibility and this trust building is really the platform from which we can build.
These players are experts in their own field, and they expect that their wealth recommendations in the crypto field will come from experts in the crypto field, and they look to us. By having this reach now and really pushing research first, we can secure the different commercial relationships. We can secure the branding. We can bring in the customers. Over time, we can work with these players and add value by bringing them over to our trading, to our investment, to the data application, and build up over time. As I said, research is our unique advantage. It is a business unit in its own right with actually great growth potential. In addition, it's a great brand builder, a door opener, a customer acquisition tool, and not the least, a way to secure partnership and business relationship with financial institutions.
This is the main differentiator. This is where we have the most traction, and this is what paves the way for the growth we are planning for in the years to come. Looking back at the quarter and the financials, it's been a rough quarter, as I said, and our drop in revenue primarily stems from a drop in trading volume from retail, as most of the industry saw. However, our mining was also hit hard, meaning that it was both a drop in revenue, but also more importantly, in gross margin. Bear in mind, the mining operation has been moved to Northern Norway, where the electricity prices are way lower, where the profitability is currently high, and from next quarter and onwards, we all gonna see that contribution to gross margin coming back at full force.
Looking at the result, there's been a lot of different kind of one-offs and accounting technicalities, resulting in the financials as being a little bit hard to read for this quarter. First of all, we have the great news that Kaupang saw strong enough growth to actually trigger an earn-out, which is accounted for as a cost of NOK 11 million, to be settled in 50 million or a little more than 58 million shares later this autumn. If you take that out, the result was a loss of NOK 9.7 million. However, baked into this loss is also depreciation of cryptocurrencies used as inventory in the trading operation. In other words, a depreciation that has no effect on our cash balance.
In addition, we had a couple of one-off costs in relation to moving the mining, which means that from next quarter and onwards, we expect the results to be back in line with what we had in Q1. In addition, I can also highlight that if you're looking at EBIT, we did a write-down to reflect the changed valuation of exchanges, cryptocurrency exchanges in the market. We've seen giants like Coinbase fall around 80% year to date, and it was natural to reflect that in our books as well, without that having any cash flow effects or any kind of real changes to the value of the company. There's a lot more details in the report for those who want to dig in, and also feel free to ask questions about the financials in the question section afterwards.
I think the main takeaway is that we have a cash balance, or we ended the quarter with a cash balance of NOK 31 million. From next quarter onwards, these one-offs are going to kind of disappear. Mining is back at full force, and the technicalities didn't have cash flow effects, which means that we are in a good position to continue building and continue to execute on our roadmap. To summarize, we are on track. The platform is maturing, and we're rolling out the different applications on time. We are doing what we said. We are launching them as simple applications first and then iterate over time, making them more powerful. Earlier this year, we launched the research application. Now we launched the first version of the invest application, and for the rest of the year, the main focus is on the trading application.
In addition, a data application will be rolled out in due course due to client or user demand. What is really important to remember here as well is that we're building this on a cloud infrastructure, which gives us the technical flexibility to scale this to millions of users, to expose our products as APIs and as a SaaS to enterprise clients over the coming years. This is really what we're building for a multiyear period of growth, where we're building bit by bit and ensuring that we are ready for when the market turns positive again. The world wealth management is highly fragmented, but we are making sure that we can serve the clients regardless of their system.
We know where they are and how to reach them, and we know their differences, and we build our system so that we can serve them, whether they use paper, which actually a lot of them still do, Excel, which most of them do, or some few of them, advanced trading platforms. Our job is not to present one solution and then force it on others, but rather to listen to our clients and really figure out how to solve their problems, take that into our product roadmap, and have a user-driven process going forward. The very interesting thing here is the observation that our target market is growing more and more interested in the sector. Retail has lost a lot of the interest in crypto, but private wealth and institutions are only starting to dabble with this industry.
At the same time, our research arms continue to pave the way for partnership and distribution, continue to see sustained interest despite the volatile market. This is really what excites us and gives us the motivation to push through these tough times because we do see this progress every day, and we are certain that the crypto industry is here to stay. I've been through three rough bear markets in the past, and it's a part of the game of being in crypto. What will really set us aside or, like, really makes us shine is to build and push through and be ready for when the market turns, which it will. We can move over to questions.
Okay. Thank you, Torbjørn. We got a couple of questions for you today. Some are asking about the negative result this quarter. What measures are you taking to cover this going forward?
Yes. I said, a key measure we have taken already was to move the mining from southern part of Norway, where electricity prices went more than 100x up, to northern parts of Norway, where the current profitability sits around 70%, or above 70% actually, with the given bitcoin price. This will already from Q3 contribute to a higher top line, but also more importantly, a higher gross margin. Also, a lot of the costs were one-offs or accounting technicalities that you will not see next quarter. Also, as I said, some of them also didn't have a cash effect. That's actually the main changes, which means that you should expect a result for next quarter more or less in line with Q1 this year.
Of course, our activity is to some degree in the short run also influenced by market sentiment, which we don't control, but we are in a good position. We have a strong enough cash balance to keep going and keep building for many quarters to come.
Thank you. We also got some questions on the trading app. Can you say something about the process there, and will it be available only in the Nordics or in Europe or even in the whole world?
The trading app will be available across Europe. From a regulation point of view, there are some limitations what you can do in regards to marketing in some countries, and we'll make sure that we are compliant with that. At the same time, the MiCA, the Pan-European regulatory framework, is in development, and we will make sure that we get the MiCA license as quickly as that is possible. The app is going to be available for, like, a Pan-European audience. Initially, we have some core segments that we'll kind of bring onto the app and focus on, but really, a Pan-European offering.
It'll consist of a closed loop for convenience and ease for those who just want a financial exposure, in addition to an OTC desk with kind of deposits and withdrawals of crypto for those clients that want to trade larger amounts. Rather than only being voice for OTC, which it is, or, you know, SMS or other channels, which it is today, it'll also be a fully automated interface to interact with the trading. Please bear in mind that we are going to launch the trade app as simple first. The first version you see might be fairly basic on the surface. However, all of the heavy lifting has gone into how we build the ledger, how we build the automation, how we build the order routing on the back end.
We will iterate on the front end to add features and tweak it to make it more and more powerful over time.
Okay, thank you. We also have a question on Pure Digital. Do you have any update there? Or can you say something about the potential revenue streams?
On Pure, which is this project building an interbank market for Tier 1 banks, they continue to see interest from the banks. What's been very interesting to see is that actually a couple of banks that had gone a little bit cold has now come back with full force and wanting to re-engage with the project. I know there's a lot of you out there who really want to see news about Pure out in the open, and I would love that as well. However, working with Tier 1 investment banks in a regulatory uncertain environment is kind of in its nature a slow and steady process. I can assure you that they are continuing to see progress.
They are now in the process of actually expanding the team to meet that increased interest from the banks, but also step up and accelerate the dialogues that are ongoing with regulators. I expect with the increasing clarity, which is slowly but surely emerging with regards to regulation, that you'll start to see more movement in relation to Pure in the future. For revenue streams, it's still kind of pre, like a pre-revenue. They have done test trades. The tech is there, but they kind of haven't started the trading yet. So it's very hard to also anticipate when the different banks will be ready and when they'll trade at what volumes.
That said, to build out the interbank market for Bitcoin and other digital assets, if that becomes successful, the revenue we'll see a couple of years from now will be massive.
Okay, good. Looks like that's all the questions we have for today.
Thank you so much, everyone. Have a great day, and as always, feel free to send an email or reach out if there are more questions.