Strategy
Bitcoin Accumulation Strategy
Our fund operates on a Bitcoin Standard, meaning Bitcoin is our main investment vehicle and our reserve asset. Bitcoin will make up roughly 60% of the fund. The remaining 40% will be allocated towards equities in the Bitcoin ecosystem and USD. Allocation percentages may vary depending on performance, and the portfolio will be rebalanced based on the stages of Bitcoin's cycle.
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As the value of Bitcoin—the network and the underlying asset— continues to grow, we expect the strongest equities within the ecosystem to perform at a multiple of Bitcoin’s performance. We will deploy capital strategically towards companies currently executing a Bitcoin strategy and identify opportunities as new entrants come into the market.
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Our equity focus in the Bitcoin ecosystem currently consists of MicroStrategy (MSTR).
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Our Bitcoin miner analysis focuses on the current market conditions to identify which miners are operating with the greatest margins, and we break down their management decisions to determine who is likely to sustain their margins in the future.
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MicroStrategy is the first operational company to adopt a Bitcoin strategy, paving the way for other operational companies to follow suit. The reconfiguration of their corporate treasury strategy to a Bitcoin standard transforms their ability to return shareholder value. As demonstrated in the case study for MicroStrategy, the performance is remarkable. Michael Saylor, the CEO of MicroStrategy, has open-sourced their playbook, and copycats are coming.
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We are actively monitoring the market as well as influencing companies to adopt Bitcoin as their treasury reserve asset. Effective implementation of a Bitcoin strategy will prompt a timely response of due diligence and potential capital allocations.
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In our current market, we have identified CleanSpark (CLSK) and MicroStrategy (MSTR) as two equities in the Bitcoin ecosystem that are poised to outperform Bitcoin during this bull market spanning the next 12-18 months.
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We monitor sophisticated on-chain data analysis and macro indicators to help us navigate in and out of positions. We expect our equity positions to experience greater volatility not only during the bull market but also during the bear, making it paramount that we stick to our approach and be disciplined with our strategy.
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We will then take the proceeds from our equity positions and allocate them back to Bitcoin during the proceeding bear market, allowing us to continue growing our Bitcoin position. Hence, “A Bitcoin Accumulation Strategy.”
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Bitcoin Cycle Pattern
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Bitcoin has historically followed a four-year cycle pattern centered around the halving event. Each halving precedes a parabolic price appreciation, where the market must find a new supply and demand equilibrium. The rapid price appreciation in past cycles, has created greater demand for Bitcoin and a FOMO craze period in Bitcoin’s price action. These parabolic moves are not sustainable and have historically led to significant drawdowns after a blow-off top. Nothing goes up forever, and market corrections are a healthy occurrence that contributes to the maturity of Bitcoin. We believe that Bitcoin will continue to follow these cyclical patterns until it doesn’t and that each cycle will bring greater adoption.
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Though Bitcoin has historically followed a cyclical pattern, these trends and models will eventually be broken.
For example, when nation-states simultaneously realize the national security significance of stockpiling Bitcoin, all models will be broken. We have yet to see how the game-theoretical adoption of Bitcoin will play out, but we will not be on the sidelines. Bitcoin is the “End Game” for our fund because Bitcoin is the “money,” and it will store value across space and time better than anything that has ever existed. Gradually, then suddenly.
We utilize a multitude of on-chain data and research tools to help us understand where we are in the Bitcoin cycle. We use this information to inform our decision-making when we rotate in and out of our equity positions.
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We take a different approach when it comes to our Bitcoin position. We recognize that Bitcoin is the most pristine asset humanity has ever encountered, and our goal is to accumulate, not speculate. ​
Bitcoin Miners
Bitcoin mining is a highly competitive business with rapidly evolving market dynamics. It is also the most critical element of the Bitcoin ecosystem, as it provides the security that holds the entire network together. Bitcoin mining is obviously not the same as gold mining, but it is a similar concept. To ‘mine’ Bitcoin, entrepreneurs around the world are expending energy to power their computers to generate newly minted Bitcoin.
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Every 10 minutes, the Bitcoin Network produces a nonce: a random number that is used only once. The computers, which are decentralized across the globe, all compete to guess this number in order to earn the block reward: 3.125 BTC.
As the network grows and more computers begin making guesses at the nonce, the difficulty of guessing the nonce is automatically adjusted to average a successful guess every 10 minutes.
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The mining companies that can generate the highest number of guesses at this nonce for the lowest cost of energy and compute are likely going to be the most profitable Bitcoin mining companies. Successfully navigating this highly competitive market can be extremely profitable during bull markets as the increasing in demand for Bitcoin causes profit margins to increase rapidly.
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Specific metrics and ratios we look at when identifying which miner is likely to be a top performer are debt, operational efficiency, hash growth, projected future hash growth, Bitcoin production/per rig, BTC Held/Market Cap, EBITA Margins, Liability/Market Cap, and Production/Market Cap.
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Given our data and analysis we believe that CleanSpark will be a top performing miner and not only outperform Bitcoin during this bull market but outperform the rest of the miners as well.
Corporate Bitcoin Adoption
Bitcoin enables more accurate and strategic capital management because it is free from the pressure of inflation, which creates an artificial urgency to spend the wealth they generate. Traditional companies operating within a fiat standard are forced to take action with their cash positions to avoid the consequences of a depreciating dollar. Their tools for combating inflation inevitably end up destroying more shareholder value than they can create.
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By utilizing Bitcoin as their treasury reserve asset, MicroStrategy now possesses an indefinitely appreciating asset that supports the business, and corporations are taking notice.
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MicroStrategy is effectively creating an endowment for the company’s future. All business operations aim to accumulate more of the greatest store of value asset, which is, in effect, the greatest way to increase shareholder value.
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MicroStrategy is the first publicly traded company to adopt a Bitcoin Standard. Since their CEO, Michael Saylor, announced their initial purchase of $225 million worth of Bitcoin in 2020, they have increased their market cap from $1.3 billion to over $25 billion.
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With Bitcoin being the Apex asset, it becomes imperative for every corporation to adopt a Bitcoin strategy, or they will eventually lose to competitors who do.
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MicroStrategy's Bitcoin strategy has allowed them to preserve the wealth created from business operations and to leverage their capital structure to accumulate Bitcoin on their balance sheet. Astonishingly, MicroStrategy now holds 214,400 Bitcoin ($15 Billion), which is twice as much as all other publicly traded companies combined.
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Bitcoin enables more accurate and strategic capital management because it is free from the pressure of inflation, which creates an artificial urgency to spend the wealth they generate. Traditional companies operating within a fiat standard are forced to take action with their cash positions to avoid the consequences of a depreciating dollar. Their tools for combating inflation inevitably end up destroying more shareholder value than they can create.
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By utilizing Bitcoin as their treasury reserve asset, MicroStrategy now possesses an indefinitely appreciating asset that supports the business, and corporations are taking notice.
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