Bitcoin & Crypto Portfolio Update; Argo Blockchain PLC Notes (NASDAQ:ARBKL)

Introduction

Housekeeping

In some respects, this text has been within the works for some time. I initially submitted it to In search of Alpha in early January. In some respects, you can’t keep away from politics in terms of Bitcoin (BTC-USD). The Bitcoin undertaking itself emerged as a response to the bailouts, cash printing and U.S. authorities abuse of the reserve forex following the Nice Monetary Disaster (2007-2009). Thus, one can’t simply deny that HODL’ing Bitcoin is a type of voting together with your hard-earned financial savings, in addition to a guess in opposition to the Federal Reserve, central banking and bureaucrats.

Since early January 2022, the politics of Bitcoin have come to the forefront the world over in lots of respects, whether or not in Canada with the trucker protest and Trudeau’s heavy-handed response, in Turkey and Argentina as a response to excessive charges of inflation, in El Salvador as that nation seems to be to challenge Bitcoin bonds, and now in Ukraine and Russia in response to the struggle between these two nations. No matter what you consider that struggle or politics basically, the ability of Western central banks to freeze the financial institution accounts of people, corporations and even Russia is eerie and on full show, and the appearance of central financial institution digital currencies will solely speed up this energy. Bitcoin, nevertheless, stands tall as a contra, dare I say, political pressure in opposition to the powers of centralization, the intrusive energy of the State and corrupt central bankers.

Portfolio Issues

In that Unique Draft, I had tried to provide readers an replace on my portfolio, with the important thing level being that I used to be lowering my crypto holdings materially. Certainly, I did scale back my crypto holding from roughly 12% of my general portfolio down to eight%, which proved to be transfer. Had my Unique Draft of this text been revealed quickly after I submitted it, the timing would have been wonderful. The the crypto market began to tank in earnest, earlier than I might incorporate updates. Thereafter, I obtained busy with work and, subsequent factor you already know, it’s nearly Could.

In any occasion, what I can do right here on this article is 1) present an replace on my portfolio holdings, 2) observe that I stay bearish on crypto for not less than the following couple of months for causes famous within the subsequent paragraph, and three) spotlight a brand new crypto associated funding I’ve been accumulating.

With respect to my present short-term bearishness on crypto, what I had written again in January within the Unique Draft (not revealed) nonetheless applies:

A bear market is all the time coming in crypto and sure a mathematical certainty given the volatility of the asset class. The Fed’s need to tighten coverage is already inflicting some giant declines within the area, and a well- deliberate regulatory assault might shake out weak arms, together with those that didn’t understand they’d weak arms — diamond arms can solely develop beneath the intense stress of monster drawdowns.

As 2022 progresses, know what you personal and keep away from leverage. Have ammo prepared, you’ll want to take income sometimes, and acknowledge that the trail to an $100 trillion asset class worth for the area (50x from right here) is not going to be easy. Amazon (AMZN) fell 90% throughout the tech bubble within the early 2000s and only a few, together with yours really, had diamond arms. It’s not simple to HODL, but when it’s a good undertaking with actual worth, that may possible be the very best course.

I’ve chosen to take materials income in Bitcoin and Ethereum and in any other case decreased my general crypto publicity, whereas reinvesting some proceeds in numerous various layer 1 protocols. If my cautiousness is unwell timed, I’d anticipate these various layer 1s to exceed the returns on Bitcoin and Ethereum, considerably mitigating the truth that I’ve considerably decreased my general crypto holdings.”

Blockchain Portfolio

Under is my up to date portfolio, as of December 31, 2021 and as of the time of writing.

Asset Publicity Percentages

The “Different Alt-Cash” class above contains positions in, amongst others, Chainlink (LINK-USD) The Graph (GRT-USD), Polygon (MATIC-USD), Decentraland (MANA-USD), Luna (LUNA-USD); and Polkadot (DOT-USD).

As famous earlier within the article, I decreased my crypto publicity relative to my general funding portfolio, however did tackle extra danger by investing in different layer 1 protocols comparable to Solana and Avalanche. (Additionally, I do maintain steady cash which I take into account money equivalents slightly than a part of my crypto portfolio.)

As well as, as you possibly can see, I’ve been accumulating the publicly traded “child bonds” of Argo Blockchain PLC (ARBK) (“Argo Blockchain” or the “Firm“), which commerce beneath the image (NASDAQ:ARBKL). I spotlight this funding in additional element beneath.

Argo Blockchain Child Bonds

Per its website, Argo Blockchain is a worldwide knowledge middle enterprise offering an environment friendly platform for sustainable cryptocurrency mining operations. Headquartered in London, UK, the corporate’s crypto mining operations are positioned in North America and the corporate is increasing its operations in Stillwater, Texas.

Per the prospectus, the fundamental phrases of those Argo’s 8.75% Coupon Senior Notes (the “Notes“) are as follows:

Face Quantity at Challenge: $25.00

Unique Coupon: 8.75%

Maturity Date: November 30, 2026

Shares Excellent: 1.6 million

CUSIP: 040126203

Curiosity: Curiosity on the Notes will accrue from November 17, 2021, and shall be paid quarterly in arrears on January 31, April 30, July 31 and October 31 of every 12 months, commencing on January 31, 2022, and at maturity.

Redemption: Argo Blockchain might redeem the Notes for money in complete or partly at any time at its possibility (1) on or after November 30, 2023 and previous to November 30, 2024, at a value equal to 102% of their principal quantity, (2) on or after November 30, 2024 and previous to November 30, 2025, at a value equal to 101% of their principal quantity, and (3) on or after November 30, 2025, at a value equal to 100% of their principal quantity, plus accrued and unpaid curiosity to, however excluding, the date of redemption. As well as, Argo Blockchain might redeem the Notes, in complete, however not partly, at any time at its possibility, at a redemption value equal to (i) 100.5% of the principal quantity plus accrued and unpaid curiosity to, however not together with, the date of redemption, upon the prevalence of sure change of management occasions. See the prospectus for extra particulars, in addition to info regarding sure redemption choices because of adjustments in tax legal guidelines.

I do like that the Notes pay a premium if they’re known as early, notably since I believe the present danger/reward is favorable.

Precedence of Notes: The Notes are senior unsecured obligations. The Notes rank equally in proper of fee with all of Argo Blockchain’s present and future senior unsecured indebtedness and shall be senior to some other indebtedness expressly made subordinate to the Notes. The Notes are successfully subordinated to all of our present and future secured indebtedness (to the extent of the worth of the belongings securing such indebtedness) and structurally subordinated to all present and future liabilities of our subsidiaries, together with commerce payables.

Monetary Covenants: None

Briefly, these are uncollateralized Notes with no monetary covenants. In a default scenario, the Notes rank forward of the widespread fairness shareholders and any debt holders particularly subordinated to the Notes (presently none).

Whereas clearly dangerous “junk” bonds (see pages 14-62 of the prospectus linked above for a litany of dangers), on the present share value of roughly $22.50, nevertheless, the Notes provide a yield to maturity of properly above 10%.

The Notes are largely a guess on Bitcoin and Argo Blockchain’s stability sheet which, after all, is leveraged to the value of Bitcoin.

At September 30, 2021, per the prospectus, Argo Blockchain’s abstract stability sheet confirmed:

Money and Money Equivalents: $ 85,840,094

Complete Property: $ 345,596,346

Complete Liabilities: $ 96,247,374

Gathered Surplus: $ 58,065,505

Complete Fairness: $ 250,348,972

As one can see, there may be CURRENTLY ample liquidity and belongings to cowl debt service within the close to future, and the Notes mature in lower than 5 years. Latest operational updates recommend that the Firm is growing mining production and bettering operational efficiencies.

Based on the newest investor presentation, the Firm HODL’s 2700 Bitcoin (as of March 31, 2022).

Full 12 months operational outcomes will drop across the time this text posts. Relying on the end result, I is perhaps inclined so as to add extra to my place, notably if the excessive yield bond route continues. So long as administration acts rationally and does not over-leverage the Firm, these Notes must be funding and diversifier in my crypto portfolio.

Ultimate Ideas

The final crypto bull run largely ended on or about November 10, 2021. Whereas alternatives abound in the long term, it’s (nonetheless) time to be cautious and selective and to have a plan ought to a deep crypto winter be within the playing cards. In fact, there shall be oversold rallies alongside the best way. I hope to commerce and fade the bear market rallies, whereas sustaining core positions. For now, I’m not preventing the Fed. Liquidity is already drying up and excessive yield spreads are blowing out. Within the funding area, now shouldn’t be the time to be a hero for my part. That stated, on the present value, ARKBL bonds provide an fascinating alternative to earn a yield that retains up with inflation and which is not directly supported by Bitcoin.

Briefly, these Notes are a BUY at or beneath $22.50. Restrict orders are completely needed as these shares are thinly traded and the bid/ask spreads are sometimes very broad.

Cheers!