Birkoa Newsletter 30 (Updates re: Blockchain Holdings)

Dear Birkoa LPs:

Over the past couple of weeks, following January's spectacular rally in Bitcoin and Ether (cryptocurrency tokens in general), which highly benefited blockchain companies including our public equities holdings within the space, there has been a bit of a cooling down. Although this is expected, similar to the recent cooling off in Chinese equities from their peaks, I think similar to semis, cloud computing, China in the fall, it presents an opportunity within the sector to go dip-buying.

Cryptocurrency tokens themselves are still not investable according to me (too much interest rate uncertainty around the Fed's terminal rate and when), so although I will continue to monitor the situation around them when I think the choppiness would have subsided (presumably by the end of this year as stated in an earlier newsletter), I believe public equities within the field is prime for a little scooping up.

Accordingly, I have exited my flatline position in Uranium to increase our positioning within the Fidelity Blockchain ETF $FDIG (consisting of Coinbase and Square, along with sprinkles of smaller platforms like Bakkt Holdings). My thesis is that none of these having been swept up in the crypto turmoil and requiring public disclosure/auditing, that they've been beaten down enough. I don't believe there's another wave of crypto fraud discoveries coming, and given that they've lost 80-90% of their value in most cases, buying them and continuing to add to them now could yield 5-10x in the next couple of years. 

From its local peak 2 weeks ago, the $FDIG ETF has come down about 20-25%, which has led me to buy both Friday and today, totalling the increase in concentration to 15% of the portfolio. We're still positive within the position despite the recent pullback. In the absence of bitcoin and ether, I still want to provide continual opportunities for multiples of upsides within the space, hence for the time being, this is the sweet spot.

There was nothing wrong with Uranium, and in fact it was on its way to being in the green and then some. Given the extermination of the Nordstream pipeline, European nations are moving more to nuclear as a source for power. Given this year's relatively mild winter, I believe Uranium hasn't taken off despite the geopolitical cavity that benefits Uranium, but it very well may continue to march on in the upcoming years. That being said, I thought that the same capital could provide more momentum and utility in the crypto-blockchain sector, hence I took the slight loss for the former and piled more in the latter.

My job is to sometimes make the determination as to what's the best use of capital - just like I swapped Bitcoin/Ether for China back in late-October, I thought this swap was well worth it. We will continue to do well much quicker all things being equal.

Sincerely,

Pranjit K. Kalita
Chief Investment Officer, Birkoa Capital Management, LLC