As alluded to in the Coinbase note earlier this week, I wrote up a note on the “special situation” that lurks in the myriad investments of Galaxy Digital Assets (TSE:GLXY OTC: BRPHF).
Read the note here Also, a few words on two other issues:
- The COIN DPO and the crypto sector sell-off
- Neptune Digital’ private placement
1. The COIN DPO
We outlined a few scenarios in the Coinbase note earlier this week, and what we got was the “pop-and-drop” with a classic “buy the rumour / sell the news” dynamic that hit the entire crypto stock sector.
A few subscribers emailed asking if I was concerned about the sell off, and I replied that this type of volatility is to be expected. The crypto sector has been going up so fast and so strong for the year that vicious pullbacks like these are baked-in. If you believe the overall long term crypto thesis, as outlined in The Manifesto (and reiterated elsewhere), then you buy the pullbacks.If you don’t believe the thesis, then sell the rallies or don’t get involved in the sector.
If you’re long, my advice is don’t try to pick off the intermediate tops or panic sell in these pullbacks. I’ve tried picking an intermediate top in the past, thinking I could buy back at lower prices and buy more of it.
It was a mistake and suddenly I found myself doing something I take great pains to avoid: scrambling. Having to put my positions back on while everything was screaming higher. I got my positions back on but it cost me some slippage and I learned my lesson.
Trying to short term trade this market is recipe for being whipsawed. The punctuating comment in my reply to subscribers is that I am 100% undaunted in the long term thesis, so the only thing to do during any pullback, now or in the future, is decide whether to add to any existing positions or enter anything you missed previously.
Also note that I will always inform the list when I do any trades, and I will write up more of a post-mortem on COIN in the next newsletter.
For my part I had a few limit orders on COIN in at various prices and I got filled at my highest price, right before it topped and dropped, so now I’m down on the trade.
Do I care? Only that it may go down further to a point where it looks compelling to average down. I don’t know if I’ll get the chance. Cathy Woods ARK ETFs stepped into it today and bought nearly $250M worth of COIN (and, interestingly enough, dumped about 250K TSLA shares to do it).
COIN is unlike almost every other IPO/DPO of the post-GFC bubble in that this company is already seriously profitable and growing. This isn’t Uber, or Nikola, or Slack, this is an entirely different animal.
2. The Neptune Digital’ private placement
Neptune Digital took an especially big hit on Coinbase’s IPO day, coming off something like 44% in one day. Unbelievable move that could only happen in the world of crypto stocks. Even more unbelievable was that after a drop like that, it was still up nearly 100% from when I wrote up a note on it a week earlier.
Neptune did another private placement (for $40M CAD, priced at $1.35/share) and some asked if I was expecting that. I wasn’t, but I also wasn’t surprised by it.
Many of these companies are issuing shares to raise capital, especially when their share price is up like crazy. Neptune will reinvest most of the raise into assets that will help them compound faster. Every private raise like this is another data point in our overall investment thesis. Every bought deal financing is more institutional money moving out of fiat and into crypto, doing the exact same thing we are doing: buying up stakes in companies that will dominate the space.
I’d much rather see a company issuing shares on an elevated price and reinvesting it than awarding themselves huge chunks of equity via options.
Ok that’s about it for now. I wanted to get this note out because I think this pullback is healthy and gives us some decent points for entries and adds.
