Brief post sold half my Kryptonite 1, for a modest 156% gain. I say modest as pretty much every crypto related co or asset has outperformed KR1 since I got in.
I am not happy with their continual sub-share price placements – good for their connected friends and management but not other shareholders such as myself. This, however is an irritant / contributory factor rather than the reason I am selling. I also looked at the polkadot investment that others seem to rate so highly and to me they have invested £1m in something with no clear way to get the money back. It could be that I dont understand it, or that I do – and it wont make money. It equally could be that it wont make money and will go up anyway – in a market like this it wouldn’t surprise me.
Much of this is down to risk management – my self-invested crypto tokens have almost quadrupled in value in under 5 months. This means I had 14% of my portfolio in crypto related assets – too much. I am concerned if I don’t take profits now if / when everyone heads for the door then I wont be able to get out at anything like my current healthy valuation. I have also sold a few litecoin – which have increased in price 900%
This is a very difficult thing to invest (or more accurately speculate) in. It has no underlying value, but yet has a value as people believe it does. As I wrote before money is a social concept and this money has value as people believe it does. I am therefore betting on supply / demand and it has elements of a ponzi about it – as does fiat money, and even gold. If people believe gold no longer has value – then it doesn’t.
I am also concerned on missing out due to certain dynamics of the market. No-one with money who is sensible puts more than a small fraction of their net worth in crypto, my initial 5-7% was in hindsight punchy…. This means that (say) when they buy their bitcoin they lock it up. If it doubles they go from a 1% to a 2% portfolio weight. It still doesn’t matter, in the big picture they wont sell for that. Maybe they sell (some) for a five fold gain or ten fold gain – even then I question if they will they may believe they should hold a higher weight – so when it goes up again they make proper money….
The end result is more and more bitcoin get locked up and the price drives up to a greater or lesser degree, this of course attracts more people to it in a virtuous (if you hold) circle… There are counter arguments – apparently a handful of wallets hold 40% of coins, equally a large proportion are lost. I don’t actually believe the whales will sell anytime soon. If you are not going to sell after a run-up from $1000 to $18/20’000 why will you sell after a bigger rise ? If anything this anchor’s your belief you should hold.
This of course cannot go on forever – or else bitcoin becomes the economy. It’s clearly widely overheated, cryptographic kitties are being sold for $20’000.
Stocks I don’t own are going up 1000%. It reminds me of beanie baby mania or the dotcom bubble.
Crypto exchanges report crazy growth in demand – they are down all the time….
The smart thing to do isnt to sit on the sidelines and say ‘its a bubble’ its to try and be early in and early out to milk for all its worth. Classic bubble psychology but perfectly logical, for most of the population who don’t have much at all its one of the best chances of building wealth quickly. If they put their savings in and lose the lot – they are still regular working people, chained to jobs. Remember median household wealth in the UK is only £225k – for ctwo people, with much in property. If they are smart enough to get in and out right it can transform their lives with a pretty high probability. In a lifetime you don’t get many opportunities like that.
Look at it another way – if it doubles (easy in the current market), you can sell half and run the rest in some sense for free….
I won’t go all in – too much to lose but if I were poorer it might be a sensible bet.
Equally I can’t justify not selling some – as it could all end tomorrow. Government can regulate or confidence can evaporate taking this down with it. I think the correct thing to do is to trim periodically while letting a core holding run. Ideally I will slightly allow the portfolio weight to rise as it goes up. Selling now could be very costly vs peak – if we are not at it but has to be done.
Take from that what you will – just my two cents…. As ever thoughts / comment / criticism is welcome below…
Deep Value Investments Blog 
I’ve noted your blog post of yesterday evening and the 50% reduction in exposure to KR1, Interesting you don’t look at the non correlation between KR1 and Crypto growth pace as an opportunity of possible re rate on behalf of KR1, My views are obviously very simplistic in the sense that KR1 are continuing to make humongous ROI,s that are keeping pace with cc so why would the sp not eventually catch up to a degree which would indicate at least another 150% tick up , , The polkadot investment I would not begin to understand, However that exposure is only say 8% of portfolio which @ the pace of growing NAV can be written off ! The risk management thing I fully appreciate and respect and I am guilty of not applying this aspect as paramount within my appetite for risk, But again we are experiencing a phenomenon in the form of Blockchain / crypto that the world has not seen in a good while, SO the burning question _-___is the blockchain sector in its infancy OR is it a bubble , agreed bitcoin and certain cryptos have no intrinsic value so they are in the midst of a bubble and there is no doubting blockchain is vulnerable to a crypto rapid demise but blockchain is an emerging technology so would it be prudent for George McD & Co to diverse more into blockchain and slide away from the token economy ??? For me one of the biggest reasons why KR1 sp is ONLY 12.25 is the restrictions posed by a nex listing , your average punter is put off by the advisory commision and basic fee,s of £50 a trade to that limits a punt to at least £1/2 K to cover entry and exit charges alone on a 10% profit margin, One a final note did you offload ALL of the 50% yesterday or was it a drip feed sel down ,If it was the former then the market soaked up that volume no problem and maintained an sp increase , Of course I have a bullish view its natural human reaction , Thanks 🙏
Thanks for the comment David….
Yes crypto is a phenomenon – equally its getting out of hand, I dont want to be last one out without taking some profits….
KR1 has been reasonably well publicised by me, Wexboy and in the IC – so I suspect if it were about to pop upwards it would have done so already. I doubt the impact of a NEX listing remember its also really illiquid…. I am less convinced average punters are put off… I dont think they are assuming a 10% profit margin – anyone in this looks for it to double as a minimum….
ROIs are large in parts but not universally – and their reporting could be loads better….
I think ICOs and blockchain are in a bubble but can go further. Given that this should have moved more. My on instinct is to cut laggards and let winners run – but I could be wrong on this. There is a strong counter argument towards mean reversion….
Unfortunately I am not wealthy enough to influence the KR1 shareprice – particularly on an active day. (Maybe I could if it were a large position of mine, but it isnt, even after the growth. I was able to get out in one pop – and my broker messed the deal up so it doesnt even show on the tape…
Hi Rob
Not convinced its getting out of hand but the pace is staggering and caution is most definitely the order of the day, For those of us who have been involved within the markets in one form or other are familiar with methods of access , However crypto trading , wallets etc are an all together something different and not so accessible hence I have not ventured into direct crypto purchase , KR1 being listed on nex does limit access and the charges can be obscene so I know for a fact it has deterd many a would be investor, Not all punters apply heavy entries
I wholeheartedly agree on the lack of IR and transparency on there holdings and its abysmal despite that I’m not holding for their social skills , For me both KR1 & COIN have a lot further to travel and there investing teams are shrewd and are open to diversify if necessary
All the best in your endeavours
Dave M
Thanks David, I suspect one more major crash before mainstream – saw interesting article of 70%+ crashes in bitcoin history – today’s moves were crazy…
Good Call on your behalf though Rob regards timing, Although KR1 only 25% pull back ( hopefully) ,COIN suffered a more severe retrace with what must have been a few PI,s flapping, Although one of the main reason was an x director dumping , CC,c regaining ground after the correction today
https://www.google.co.id/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0ahUKEwjGhtzSxJ7YAhULsY8KHXQcALQQFgg2MAI&url=https%3A%2F%2Fbusinessdigit.com%2Fbloody-crypto-christmas-calm-down-its-a-correction-not-an-accident-2&usg=AOvVaw1czwm4gxpHQUYf8xp7HCvt
, I was thinking another 3 month Bull run ( on the bk of a showing of strength to mirror September $2775 btc drop thanks to china ) then another correction = consolidation mainstream end of financial year
,, Ho Ho Ho Merry Christmas and a Happy ,Healthy and prosperous 2018 for all readers
“The smart thing to do isnt to sit on the sidelines and say ‘its a bubble’ its to try and be early in and early out to milk for all its worth. Classic bubble psychology but perfectly logical, for most of the population who don’t have much at all its one of the best chances of building wealth quickly. If they put their savings in and lose the lot – they are still regular working people, chained to jobs. Remember median household wealth in the UK is only £225k – for ctwo people, with much in property. If they are smart enough to get in and out right it can transform their lives with a pretty high probability. In a lifetime you don’t get many opportunities like that.”
I don’t see how this can be considered smart – hope you are being sarcastic and I just missed it. As you say, this is classic bubble behaviour and as usual will result in a transfer of wealth from the FOMO crowd (exactly the people who are likely to throw their savings at this in pursuit of fast money) to the people who are acting more rationally. These recipients are probably already wealthier in general. Plus value will be continually siphoned off by the utility companies, hardware manufacturers, data centres, miners, exchanges, and the traders/banks. High probability opportunity for a median person? Yeah right. Financial lives will be ruined or set back years as always when people lose savings or worse, lever up with credit cards or other debt. A lucky few at best will profit from this.
Meanwhile those investing sensibly in companies that actually provide valuable products or services will continue to see returns over the long run, regardless of the coin of the realm.
I disagree with you – I am not being sarcastic. If you are a guy working a 9-5 – actually 8-7 in the modern ‘flexible’ working world. You don’t have the luxury of just waiting for wealth to build – your life is slowly ebbing away doing a job you most probably hate, and that is very likely doing you physical / psycological harm.
You dont have time to study in detail – best idea is to come up with a trading plan – put in 5k or whatever that you were going to waste on a holiday or car and hope it can turn your life around.
Investing sensibly in companies – at its very very best might get you 20% a year compounded – more likely 5%. End result is you waste your life in a job you hate. Best to take a chance if you are lucky 5 bag or 10 bag, or better, then maybe, just maybe you can get out
Even taking leverage – and going bankrupt / into an IVA to me seems more attractive than leading an appalling life at the mercy of employers. If you win – you can escape the job/life you hate situtation. If you lose your situation isnt that much worse.
I realise this is something of a nihilistic attitude – and it isn’t everyones view of life but having experienced a series of pretty terrible work situations. I am very much in favour of pretty extreme action to get people out of the rat race, even at extreme cost.
Having said that I didn’t do this – I bet with a proportion of my assets – but I am in something of a different situation, mostly out of the workforce…
For winners there has to be losers, I would consider health before wealth
For the majority of folk there life roadmap is predetermined , The God,s see fit to bless some of us with a sense of adventure and a sociable attitude and in my case 0 academical qualifications but a horde of healthy children to support including 4 so far through 3 years+ @ university , The handicap of both those facts has the possibility of living life in a quagmire with no light at the end of the tunnel or one can adapt and utilize one’s assets to grasp that blade of grass and emerge from the swamp
Personally I engage in the financial social media to digest and learn from those more fortunate, experienced and with more connections than myself to broaden and enhance my knowledge to a point where I feel comfortable and confident to part with my hard earned £ into various investments including the circus that is AIM where sentiment & volatility is the name of the game
2017/18 will go down in history as the emergence of crypto/blockchain to the masses as a technical breakthrough and a golden opportunity for those fortunate to be positioned for right place right time in the markets , Of course there will be casualties but one can limit the risk by sharing information and foresight on forums such as this , So please guy,s can we be winners together and keep contributing our honest views on here !
Interesting find and cheers to you for posting on a value blog. Re: your point on scarce chances, have a listen to TIP’s interview with Ed Thorp. He distinctly mentions getting his start on a speculation that provided him the ability to deploy capital for a living, essentially.
Now, I guess this is what Ben Graham might have called an intelligent gamble. Actually Kryptonite is basically running institutional type pre-allocation (IPO) arbitrage except in a more highly volatile space than usual, and in some cases, receiving allotments at ridiculously steep discounts to offering price. That’s wise(r). For the value purists, a read of good old Ben’s memoirs would reveal he did similar things early on (not that this is any argument now!).
Anyway, I like a couple of things:
(1) their focus on projects dealing with making the existing blockchain infrastructure more usable. This attracts developers and tilts the odds of adoption upward.
(2) they aren’t fooling themselves. They’re wringing out profits out of manias and putting into longer term blockchain platform ventures, co-backed by the Glenn Hutchinses (Silver Lake/Digital Currency Group) and Tencents of the world.
(3) they understand the network effects value of marketing themselves as a “crypto vc”
Too bad I can’t access the NEX as a non UK citizen!
Hi Ben,
Thanks for the comment, I enjoyed TIP. I keep reading of investors who got their initial stakes in the dotcom bubble… Lots of parallels to crypto world.
Yes KR1 seem to be moving more towards being a crypto vc – rather than an altcoin investment trust. Much more difficult to value as crypto VC – and arguably undervalued still – much of the market cap is still underpinned by tokens.
You can access NEX as a non UK citizen. Unfortunately it is a bit involved. You need to go here: http://www.nexexchange.com/for-investors/find-a-broker/
Find a broker you like (I would suggest TD Direct (now ii) or perhaps Hargreaves Lansdown (not getting paid for referals).
You will then need to do things like submit certificated passports / tax certificates – then fund the account in GBP. KR1 is very illiquid – particularly as word is getting out so you also have a 15% spread and quite high comissions to pay.
Your reward is that if you get it right the price rise could be phenomenal, even from current levels…
Even in the UK NEX is a non mainstream exchange – KR1 have intentions of moving to AIM but there is no definite news yet. This will likely prove very positive for the price – it might make it easier to buy.
Equally when the crypto bubble pops my concern is this can lose very large percentages very rapidly – regardless of the underlying merit of any of their investments – of course this presents an opportunity….
Wexboy’s post might also be of interest – he follows a return on capital approach. This works, until it doesnt….
https://wexboy.wordpress.com/2017/09/30/kryptonite-even-superman-could-love/
Thanks a bunch mate.
So, those brokers you mentioned no longer offer accounts to non-EU citizens. The last bastion — that offers access to NEX — is The Share House. I’ll work with them to get an account opened, hopefully, as I rather enjoy tiny exchanges given the volatility of listed components which may allow for attractive entry points (see the Canadian Securities Exchange, for an NEX parallel). Plus it’s much less daunting a task to do an A to Z search on smaller exchanges.
Read Wexboy’s post after yours and a few books on the subject. Most of the focus, incorrectly, is on tokens, the infrastructure and making it more realistic for use, is way more important. To that end, following closely the actions of Glenn Hutchins of Silver Lake is rather useful.
I will check out Glenn Hutchins. The name is unfamiliar to me – so thanks for that.
If you continue to have problems accessing due to your non EU status you could set up a limited co. in the EU/UK then have that sign up/trade – may or may not be worthwhile for you.
This of course is not financial advice and you should consult professionals…
I should also add if you want to see size available / past trades sign up on ADVFN – its available there….
Thanks again. Glenn Hutchins is a co-founder of Silver Lake, probably the most successful tech PE (aka LBO) shop. I was frankly shocked to hear he had dived right in. See here: https://www.ft.com/content/7b9797bc-ec09-11e7-8713-513b1d7ca85a
Unlike the Winklevosses’ lines of reasoning on the subject, his premises focus on the underlying companies’ value add to society in the long run.
As my own perhaps jaundiced view is that blockchain’s benefits, if any, will eventually flow to humanity via the S&P500 (or vice versa) chiefly in the form of lower costs, this was a more attractive argument. Impressively, some of Kryptonite’s picks have overlapped with his.
That said, he has way more cushion than I do in terms of “experimenting” with capital, so I do not think his odds are psychologically identical to mine or most others…