If I had a billion dollars: Crypto and Monkey Business Edition

If I had a billion dollars the first thing I’d do is buy a monkey.

Not a howler monkey or a languor monkey, or one of those that gets creative with how they say hello, but a regular capuchin monkey—one that hasn’t reached puberty yet so he doesn’t get aggressive. His name would be Jocko, and he’d wear a top hat and slacks and hold my hand when we went everywhere.


Two reasons:

  1. I’ve always wanted a monkey and if I have a billion dollars nobody is going to tell me no. (It’s called the perks of having Fuck You money)
  2. You can tell a lot about how serious a person is by how well they react to the unexpected, and nobody expects an eccentric weirdo billionaire with a monkey.

My interest is in cryptocurrency and blockchain and if I had a billion dollars, I’d be in the market for something long term. I want to turn my billion into three, or five, or fifty, so I’m looking for miners, primarily. It’s still too early for decentralized finance, non-fungible tokens (or digital pog) haven’t convinced me that they’re anything more than a fad, and the same goes for the metaverse (or digital Second Life).

NFT and the metaverse are good in theory, but will fizzle out but I’ll admit I could easily be wrong about this one. NFT and the metaverse have no functional utility and offer absolutely nothing to society by way of tangible benefit, but that doesn’t mean people won’t throw scads of money at them and make them live forever.  None of my billion, though.

Who’s a good monkey? YOU’RE A GOOD MONKEY!

Nobody said consumer decisions had to make sense and if there’s anything I’ve learned from watching human behaviour is you can never underestimate the effectiveness of a good narrative in convincing people to buy pointless shit they don’t need. If that happens, I’ll eat my FOMO and move on.

But it’s still too much of a gamble for me. Miners, though. As long as there’s money to be made in mining crypto—I’m there and so is my prospective billion.

There isn’t a lot of quantitative data to effectively differentiate one company from one another—there’s some, and when we get to breaking down my top three picks, we’ll discuss it—but there’s a point to the monkey beyond the fact that he looks cute in his top hat.

In this scenario, I’m Mr Bigshot Billions Investor Esq. If the CEO in question takes a look at me (and my monkey) with our fancy britches and lets us on the floor where he stores his ASIC rigs without saying anything for fear of offending me—well, he shouldn’t be surprised if I let Jocko do his thing. Suddenly he’s got a pre-pubescent, ill-trained capuchin monkey chasing his techs through the stacks, climbing all over the place, urinating in the off-take vents and doing his best Incredible Hulk impression, ripping out wires and screaming.

When said CEO inquires as to why I let a monkey loose, I’ll shrug. Monkeys are wild animals. What kind of judgement could you possibly have if you allow a wild animal loose in your operation?

Needless to say, I’m not likely going to put any money in that company. A company is only as good as the CEO that runs it.

If the CEO takes one look at me, the monkey, and says (respectfully) that he doesn’t give a shit who I am, and that he’s not going to let me take a wild animal onto his production floor—well, I’ll hand Jocko over to Elon, the sentient AI-driven robot servant I had commissioned to take care of my monkey, and said CEO will get a point in my books.

It can’t be stated enough, but with the lack of solid quantitative metrics, a company’s only as strong as the man (or woman) at the helm, and if they’re too much of a coward to potentially say no to big money for the security of their organization, then it suggests a lack of integrity.

Now let’s get into my top three (and why):

Hut 8 Mining (HUT.T)

Pertinent stats:

$1,871,631,000 market capitalization

PE Ratio (Price to Earnings) 27.34

Total bitcoin balance held in reserve is 5,242

Cash position: $223,225,032

Based out of Alberta, Canada, Hut 8 is one of the fastest growing Bitcoin miners in the world. Around since 2019, they have enhanced and expanded upon their Bitcoin mining operations to well over 1.94 exahashes per second, and as of November, that rounds out to 8.84 bitcoin per day. For context, Bitcoin is worth $51,001.69 at the time of writing, down from setting and resetting all-time high’s (ATH) earlier this year. The present ATH is $69,044.77—two months ago.

This time last year, this is one of the companies I felt were on the precipice, depending on Bitcoin’s fortunes. If Bitcoin tanked Hut 8 would go with it and if Bitcoin did well, so would Hut 8, and therein lay the gamble. As we know from 2021, Bitcoin most decidedly did not tank and as such, Hut 8 is ascendant.

It’s also worthwhile to note that Hut 8 is on top of all the trending items in cryptocurrency mining. I’m talking about green crypto, and other self-regulatory initiatives, intended to get out ahead of the government’s of 2022, when they start seriously regulating the cryptocurrency and blockchain industries.

Now for the question we’ve all been waiting for:

Would they pass the monkey test?

Their CEO is Jaime Leverton. She brings more than two decides of leadership experience, including chief commercial officer for eStruxture Data Ceters, as well as companies like Cogeco Peer 1 (now Aptum), as well as National Bank, BlackBerry, Bell Canada and IBM Canada. She’s also on the boards of the Stratford Festival (which is badass – I love Stratford), Technation, and ComKids and serves as the Chair if IMWomen Canada.

And all of that tells me one thing—there’s no way in hell she’s letting me bring my monkey to tour the server rooms. We’d have a nice chat, maybe reminisce a bit about how much the festival has changed since the 90’s when I first saw it and the early 2010’s when last I attended, and then I’d send my monkey off with Elon.

Now how much money would I sink into Hut 8?

A PE Ratio of 27 is a tad expensive, but you don’t speculate with a company like Hut 8. The fact that they don’t offer a dividend at their price and size is another negative for me. If I’m looking at a company this size, I’m thinking portfolio addition over speculation.

I do like the way they’ve been growing this year, and their retraction seems in sync with Bitcoin. Again if Bitcoin does well next year so will Hut 8. There’s no built-in indication that it will – meaning, the halving is two years away and all growth and development in BTC will be qualitatively driven rather than quantitative.

But figuring I must absolutely spend all of this $1 billion in some kind of an improbable Brewster’s Millions scenario, then I’d throw in $150 million into this company right off and see what happens in 2024.

Hive Blockchain Technologies (HIVE.V)

Pertinent stats:

$1,528,602,000 market capitalization

Diversified coin holdings – Bitcoin, Ethereum

Total Held in Reserve: 1,584 bitcoin and 2,334 ethereum.

Cash position: A recent private placement bringing in $100.2 million on top of their $4.7 million from financials released early November.

Last year about this time I chose Hive to be the one to watch for 2022—mostly, as a hedge against Bitcoin’s reduction in fortunes. They had chosen to diversify their coin options and include Ethereum mining, which seemed like a solid bet should Bitcoin decide to go south, especially with the nascent decentralized finance on the horizon.

Well—Bitcoin didn’t decline and both coins actually did quite well. Throughout 2021, Hive continuing mining both coins quietly in the background while other companies were making big moves—buying large swaths of antminers from Bitmain or black boxes—and blowing up their hashrates. Meanwhile, Hive grew their Ethereum mining fleet and developed that way and I’m perfectly comfortable with that strategy—Hive is a long term play. They’re betting on Ethereum 2.0 and being positively favoured by ETH’s staking algorithm to grow their fortunes once its launched.

Here’s the thing about staking: the proof-of-stake consensus algorithm typically favours the staker that has most ethereum to close the block. Does that mean if Hive stakes all of its 2,334 ethereum every time they’ll be able to close the block every time? No. That’s not how it works. But it means they’ll have a much better opportunity to earn a sufficient amount of cash per staked ETH that helps validate the ledger than a company (or individual) that doesn’t have that much.

And most companies are focused on Bitcoin’s big hundred thousand dollar plus payday, and not Ethereum’s lesser, but no less respectable, variable percentage for amount staked.

Let’s also not forget the inherent opportunity in the growth and development of DeFi. NFTs and the Metaverse might be hype-filled duds, but DeFi’s the real deal.

Would they pass the monkey test?

I’ve been watching this company off and on for the better part of three years, and they have had their fair share of growing pains. They’re a genuine survivor of the great crypto-winter of 2018, having navigated their way through a palace coups, and now they’re building. They’ve spent $36 million since March on development, including entry into a decentralized mining pool, and a $450,000 investment in an NFT business.

Their CEO is Frank Holmes—who does double duty as CEO of chief investment officer for U.S. Global Investors mutual fund and asset management firm. He’s a frequent keynote speaker at international investment conferences and with the business media. He also hosts a popular Blog called Frank Talk, and is one of the most widely read in finance, wherein he discusses du jour topics from multiple different industries with nuance and forethought.

This isn’t a person who’s going to make a bonehead mistake like letting some wild animal loose in their operation.

I doubt I’d risk offending him by bringing Jocko along in the first place.

How much money would I sink into Hive?

Figuring our Brewsters Millions scenario where all of my $1 billion must go? I like this company. I like their strategy. I like their conservative decision making. Yeah. Technically, they didn’t grow to the rate that I was anticipating they would in 2021, but they still grew. Here’s the investor chart.

Source: stockwatch.com

This company is one where speculation wouldn’t hurt, given the development arc they’re pursuing with ETH 2.0 and Bitcoin, but staying in and adding this one to a longer term investment portfolio shouldn’t be out of the question either.

I’m in for $500 million.

That leaves me with $250 million left over.

Is that going into the next company, or is Jocko going to get to smash?

The next company is:

Bit Digital (BTBT.Q)

Pertinent Stats:

Market cap: $501,097,000

PE Ratio: 8.22

Revenue from bitcoin mining was $10.4 million in Q3, 2021

100% of their fleet was deployed form China as of Sept. 30, 2021.

27,744 miners, including 851 bought in Q3, 2021.

Total cash and cash equivalents of $26.5 million, and total liquidity (defined as cash and digital assets) of approximately $61.5 million, as of September 30, 2021.

Bit Digital is likely the biggest publicly-traded winner from the Chinese diaspora. They felt which way the political winds were blowing and promptly left before Xi’s boys could give them the Uyghur treatment. They left China in the summer, moved promptly to New York State to take advantage of subsidized hydroelectricity and got back rolling by the end of September.

Here’s how they fared in Q3.

  • Revenue from bitcoin mining was $10.4 million.
  • We earned 248.4 bitcoins. The decrease from 562.9 earned during the second quarter was due to miner migration and fleet reposition.
  • We had no miners remaining in China. 100% of our miner fleet was deployed, in transit to, or awaiting installation in North America at September 30, 2021.
  • We owned 27,744 miners including 851 miners acquired in the third quarter of 2021.
  • Non-GAAP income from operations* was $4.8 million, or $0.09 per ordinary share.
  • Non-GAAP net income** was $4.0 million, or $0.07 per ordinary share.
  • We had cash and cash equivalents of $26.5 million, and total liquidity (defined as cash and digital assets) of approximately $61.5 million, as of September 30, 2021.

Would they pass the monkey test?

Admittedly, I haven’t had as much exposure to Bit Digital’s CEO Bryan Bullett as I have some of others on this list, but I have managed to come across a transcript for a “fireside chat” three-way discussion between Bullett, Fred Thiel of Marathon Digital Holdings (MARA.Q) and Ibrahim AlHusseini from Fullcycle Climate Partners.

Here’s a small snippet of what he had to say about the value prop of mining:

“I think one of the most obvious metrics is a fleet’s power to generate Bitcoin. Our fleet has generated a little over 3000 Bitcoins since we entered the business last year, we feel that’s a pretty strong metric, and that’s on the back of what I mentioned earlier about our spot market purchasing strategy. We’re able to assemble one of the largest currently owned fleets in the listed sector today, which gives us that ability to generate those Bitcoins. In the second quarter, that number was around 562, now, that’s materially below our run rate on a fully deployed basis, reason being a good portion of our machine was offline being shipped from China to North America during the quarter, that’s a process we expect to complete this quarter, and to then see our mining actually ramp back up materially.”

Here’s another interesting portion from that fireside chat to attest to either Bullett’s contacts, competence or both:

“Bit Digital started migrating machines from China to North America back in October of 2020, so we already had in place relationships, and logistics, and hosting partners in North America. The ban in China did pull forward in time somewhat that strategy that was already well underway. And last quarter, we were able to ship over 14,000 machines, which is our largest quarterly shipment to date.”

The company was already in the process of moving. They had been paying attention to China’s activities, their actions, behaviours and had foreseen this action before plenty of other companies.

The answer is a no. Bullett wouldn’t allow any monkey business.

How much money would I sink into Bit Digital?

$150,000,000. Minus the cost of the monkey and robot. Investing in Bitcoin adjacent companies is always a risk. But this one has a decent PE Ratio, a strong CEO at the helm with a nose for the coming regulations, and an impressive work ethic. He’s already joined the Bitcoin Mining Council on invitation from Microstrategy’s (MSTR.Q) CEO Michael Saylor. A company which incidentally would be a little too much of a risk for my blood—primarily because I steer away from companies with celebrity CEO’s, (and I’m relatively curious if Saylor may just join Jocko in trashing his own operation because it looks like fun from what I’ve seen of him on YouTube.)

So where would I put the rest of the $1 billion?

Where else? Bitcoin and Ethereum.

Hodl hard.

—Joseph Morton

The post If I had a billion dollars: Crypto and Monkey Business Edition appeared first on Equity.Guru.

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