KR1 plc…The #Crypto #Alpha Bet

Tags

Bitcoin, bleeding edge, blockchain, Cosmos, crypto, DeFi, digital gold, Ethereum, fiat money, Galaxy Digital Holdings, George McDonaugh, KR1, KR1 plc, network effects, Owner-Operator, Peter Thiel, Polkadot, proof of stake, venture capital

My main 2020 investment thesis is the assumption this #pandemic does not herald new & permanent societal change. But it will reinforce & accelerate existing trends, with #cryptocurrency/#blockchain innovation, development & adoption poised to benefit hugely. It’s just three years since my first & last crypto post (& Bitcoin‘s only twelve years old!), but its progress since has been astonishing…

We kicked off with a spectacular crypto-bubble in late-2017, with the launch of Bitcoin futures triggering the devastating early-2018 collapse…which fortunately played out in less than a year. Fidelity, Coinbase & Bakkt launched institutional-grade digital custody platforms & even the OCC confirmed US banks can now offer digital custody services. Crypto exchanges like Binance, BitMex, Coinbase, Huobi & Kraken now boast hundreds of millions/billions of dollars in daily crypto volume. Libra was announced by Facebook. More & more hedge funds are getting involved – Mike Novogratz launched Galaxy Digital, with Paul Tudor Jones & even Stan Druckenmiller buying into Bitcoin as a digital asset/inflation hedge – not to mention, family office/college endowments (are pension funds & sovereign wealth funds next?). Square & PayPal now accept crypto & more payment companies will follow. Proof of stake has emerged as a green alternative to crypto-mining. Grayscale‘s listed crypto funds now boast a $14 billion+ aggregate market cap (alas, most of the US fund industry still awaits SEC crypto approval), while Total Value Locked Up in #DecentralizedFinance is also at a $14B+ all-time high (& doubling every month/two since June!). Stablecoins are also emerging as stable-value/high-volume bridges to the fiat world. We’ve even seen listed companies like MicroStrategy & Square buy Bitcoin as a corporate treasury asset. And Bitcoin’s now only 6% off its all-time high…

The volte-face in attitudes has also been impressive, with the crypto sector recognizing that embracing (& promoting change in) existing financial/regulatory regimes offers a slice of an infinitely larger pie. While regulators are also more open too – though US regulators may remain as schizophrenic & over-reaching as ever – with central banks (like the PBoC, Fed & BoE) now floating (& trialing) digital currency proposals, to co-operate/compete with crypto. As for investors, the Bitcoin survival debate’s dead…it’s been anointed digital gold & nobody could disagree it’s not a contender. While the mantle of blockchain innovation passed to Ethereum (& the imminent Ethereum 2.0), plus the smart-contract projects & infrastructure being built atop it (3,750 DApps & counting, mostly on Ethereum). And #DeFi is shaping up as a killer app for blockchain…to join forces with #fintech & eventually #BigTech to challenge the legacy financial services/payments industry. [Maybe even value investors get this…look at bank valuations!?] Its IPO may be on ice, but Ant Group‘s still a prescient reminder (for the West) of how easily bank-customer relationships & economics can be cannibalized by disruptive technology & business models.

So Why Not Google It..?

Tags

$GOOG, $GOOGL, advertising, Alphabet, artificial intelligence, autonomous driving, Buffett, DeepMind, economic moat, Google, Larry Page, machine learning, mobile, network effects, search, Sergey Brin, YouTube

Last month, I posed a serious question:

‘So Why Not Buy Apple..?!’.

Just days later, we got our first hint that Buffett himself was buying Apple! Followed shortly after by that bombshell CNBC interview (here’s the transcript), where he revealed an $18 billion+ Apple investment*, the vast majority bought by him in Jan/recent months (& the rest by Todd/Ted in early-2016). What better confirmation of my assertion that value investors – even the greatest of them all, at 86 years of age – would be wise to pose such a question to themselves!?

[*Pretty sure Apple is Buffett’s largest common stock investment ever (on a cost basis). In fact, I wonder if it’s the largest stock investment ever made by a single investor (again, in terms of cost)? Sure, Todd/Ted/Charlie did provide some inspiration/feedback here, but we can be damn sure Buffett never buys anything ’til he makes his own mind up! So: Your thoughts/feedback?]

Granted, I got lucky…

Was I confident I’d see Buffett talking up an Apple position just weeks later? Um, no… [Don’t forget, Icahn announcing a multi-billion holding some years back was a huge surprise too!] And maybe I chose it specifically as the largest & most obvious/controversial value stock out there. Not to mention, the head fake I pulled: While I did summarise its attractive fundamentals/valuation, my post clearly wasn’t intended to be a detailed thesis. But hey, it was still the right question at the right time, so I’ll take the kudos!? And Buffett’s purchase now serves as great inspiration to present a genuinely compelling investment thesis here. Yeah but, just not Apple – I mean, who even needs a thesis right now when Buffett’s put so much money where his mouth is?! Instead, we’ll focus on a company which is arguably the antithesis of Apple – therefore, I ask:

So Why Not Google It..?