Mining Hedge – View of a Multi-Strategy Fund - TOKEN2049 Singapore 2022

hi guys uh good evening this is vineet I'm the partner and CEO of Cypher Capital One of the 100 million dollar funds based out of Dubai and you know the topic that I'm talking today is more on the uh mining Edge you know where you actually I believe that as a fund manager it's not just about uh deploying capital and getting multiples it's also about management of risk I think uh three arrows Capital has clearly shown us that uh it's not about all or nothing it's not you know you're not just uh gambling on a red or a black so here you know this is a topic that I'll be talking about how do you manage uh your Investments and risk as a fund now when you look at bull market you know if you remember one and a half years back when suddenly BTC was going all the way to sixty seventy thousand dollars this is there were multiples of projects that were coming out and deployment was really really happening like crazy you know 43 billion dollars was invested in uh late 2020. this was like every day you were having hundreds of projects that were launching you know infrastructure projects were there if you guys remember Plato and when axi Infinity came up there were thousands of people who were building games and you know money was just flying left right and center and I believe a lot of people a lot of funds invested crazily so that's what the bull market is all about deployment of a lot of capital but in a bear market now this is the criteria you have a lot of fund if you remember uh a16z just raised a six billion dollar uh fund there are multiple other funds that have been raising like crazy and there's a lot of capital that has been raised and there's a lot of dry power that is there but now the question is you know any in fact going by numbers 100 billion dollars has been added you know it's around five hundred eight thirty nine billion dollars that has been raised right now and in the bear Market people are sitting with that much cash now this leads to an amazing dilemmai when it's the bear Market how do we generate cash because there are no great you know like in the bull market where hundreds of projects were coming in a day I think today you see maybe five or ten projects that are coming so how does a VC for my investment guy really look at building revenues while in the bull market how do you generate more cash to deploy more you know once you are 100 million dollar fund you definitely want to invest much more than 100 but you should have the cash flow to deploy in these markets and then then you know the whole VC Hedges about finding these Boolean uh bear Market strategies where you know what to do and how uh to generate these cash flows and in fact this is a great cartoon where it says I think the best way to hedge against anything at any Market is to have sit on a lot of cash so I we we had Thrive for Capital clearly believe that going a multi uh strategy uh is important it's not just about uh going specific either investing into tokens or investing into equity and this is something that we as a fund have uh done as well when we look at our numbers uh this hundred million dollar fund that we uh we have personally this is again this hundred million dollar has not been raised from outside this is our personal Capital we deployed close to 70 million dollars in mining leading to a cash flow of over uh 10 million dollars a month so today even in a bear Market when everyone is looking for opportunities to invest in as well as raise Capital we are having a 10 million dollar dry powder coming every month to deploy so coming to the details what exactly do we mean by a multi uh strategy fund so you know there are certain components that we have identified which really can uh hedge you against the ups and downs of the crypto Market uh the first one is mining mining is you know though there is mining in a lot of tokens I specifically talk about Bitcoin mining and as a parent company ciphers parent company is known as uh Phoenix tech Phoenix tech is one of the companies with 20 percent of the world's hashing power in Abu Dhabi we are building the two billion dollar uh mining plant as well so when people go into mining we are talking about somewhere around a three to five percent return a month which you know a lot of you crypto guys would say that oh we are used to 100 x's and three to five percent might not be a great uh return but you know in a bad Market three to five percent is amazing compare it with real estate where you get five percent this is this is really something that can generate cash flows like uh crazy and this is again assuming Bitcoin remains at the same price the second thing is about investing into nodes you know all of these uh projects that you see around I think one of the core components is to have for them to have nodes so that the blockchains can run uh uh amazingly so this is another thing that we as a fund have been deploying building up nodes so we recently deployed 10 million dollars plus in Gala nodes we are building up a lot of helium nodes as well we have a few of our own projects where we are uh which have not launched yet but we are building into the node part then other than that we can also look at D Phi as a way to conserve cash as well as maintain cash flow you know a lot of when people talk about tokens which do these 50 100 X's you also have to understand that there are these are projects which have which may not launch in the next six months to one year you know all these projects that we see raising right now I don't think the market conditions are great for them uh to be launching in the next one here so in such cases getting into D5 which probably only gives you 8 to 12 percent a year but cease to it that you have uh cash flow which is guaranteed as well as capital that is preserved becomes critical as well then you know one of the things that I've seen with a lot of VC firms they're you know they talk about Equity they talk about tokens but they don't look at private tokens you know tokens that are listed right now if I look at the market something like a Matic which is down by 80 or something with like atom Solana these these all tokens are down by 90 aren't they great investments in the market and they're highly liquid you know in tomorrow if someone needs capital for some critical functions they can actually uh get this Capital out maybe at a plus minus 10 15 20 but private tokens also become a key way of diversifying your risk and finally you have Equity now one of the interesting things that we have seen between the traditional funds and crypto funds you know when we I'm in fact raising one of the funds I'm raising half a billion dollar uh along with Kevin O'Leary and you know Kevin comes from the traditional VC background where funds are 10 plus three years uh domain but when you look at a crypto VC fund the time Horizon for people who are becoming LPS to a crypto VC fund is not 10 years they don't look at something more than three to five years now imagine a crypto VC fund investing in equity you know we really need a huge Horizon so probably not then ideal fate but you know Equity is also important like one of the recent Investments that we have done is uh known as mistin Labs which is the makers of soy blockchain this is a pre project that you really need to be there it's one of the hot you know be it Mission Labs or be it uh uh I'm progressing the other name but you know so basically Equity also forms a component but it cannot be the core part of it because it sees to it that liquid is uh blocked for uh over a longer period of time so my the point that I'm trying to suggest is that as a VC fund you know if you have you have raised this hundred and hundred million dollars or half a billion dollar funds you need to deploy across these buckets to maintain cash flow during the bear Market to run the operations and keep yourself uh investing in other uh tokens as well as in the bull market AC to it that your Corpus increases drastically so one of one of the best ways to deploy capital is by looking at the rainbow chart so quick question how many of you actually know what a Bitcoin rainbow chart is you do not do you use it as a way to invest but do you know that it has a very high percentage chance so this is a chart which basically clearly says when is a great buy Zone and when is a great sell Zone in fact last time when uh BTC was trending at around 60 to 70 000 it was hitting that cell Zone and you know people didn't bother people thought that Bitcoin is going to land up at two hundred and three hundred thousand dollars which was illogical this has happened over the last three Cycles we have seen that Bitcoin has gone to Blue zones which were oversold zones where pair was so high and Bitcoin has reached those dead zones where you know which were the optimum cell zones these this is this is one of the best simplistic way of you to invest you actually start doing BTC and Mining when it's at oversold zones like right now I think uh when people say that the crypto markets have crashed I think it's an ideal place to be investing in today when Bitcoins at an eighteen thousand dollars I believe in the future I believe that a quarter million dollar Bitcoin in the next five years or a million dollar by 2030 is possible so shouldn't we be actually investing in things like btca and Mining shouldn't we be getting into Equity Investments today you have people who were coming with the billions of dollars of valuation has started reducing it down quite drastically then you have D5 stretches actually D5 strategies is more like any time you know it's it's a way you can deploy it into a in a bull market as well as a bear Market because the objective is not to just get returns but the objective is to have free cash flow as well as conserve capital and then this whole thing you know a lot of crypto events always talk about these private uh sale tokens you know in fact a lot of these companies out there are raising as well those ones are the ones which you should be going when the market is really starting to move back up the point is this this becomes a basis of how you would how a multi-strategy fund should be investing in and this is how we personally have been deploying uh capital so how does it actually translate you know when you look at mining how does it translate so today when we are when we have deployed the 70 million dollars into mining it says to it that you know first of all BTC mining is directly proportional to the BTC price so miners are always priced at BTC Bitcoin prices so today miners are cheaper you're getting lucrative deals uh electricity prices are down in a few uh geographies it seems to it that your cost of producing Bitcoin is quite low giving you on an average three to five percent ROI per month and again when the bull market comes this is the time that you actually liquidate a lot of these Bitcoin my uh Bitcoins that you mind and see to it that you deploy the cash that has come out of it again you know a lot of BTC maximalists don't even end up liquidating these uh Bitcoins but using them them in D5 to get uh usdt against it and deploy so this is how it becomes a hedge and makes it easier for you to invest without having the stress of how do you perform returns in fact we ran some calculations and figured out that from day one thanks to BTC Mining and nodes our fund performs at a Forex without any stress and whatever multiplic multiples come out of investing inequity and tokens really help so the thing is the time is now this is something interesting that I see you know when BTC is at a 70 000 price everyone lines up on the window to buy a BTC but when BTC crashes to 18 000 everyone thinks that blockchain is going to die and there is no future for BTC so what I advise people is you know it's the time now you really need to get started and start building for the next cycle we all I don't know how many of you have analyzed data from crypto space but 18 months before halfing the crypto Market start taking a move on and 18 months post halfing you see Bitcoin and crypto all-time highs this happens between November and December of uh 18 months after the halfing part so point is you can't be starting after 18 months you need to start building these strategies and building your cash flow for Investments now so to sum it up thank uh I'll just tell you about Cipher Capital we are a hundred million dollar fund uh the self-funded fund that has a multi-investment uh crypto strategy uh as fund one so I Cipher Capital was initially known as Phoenix VC which invested in over uh 200 plus Investments the fund did quite well from 10 million dollars to half a billion dollars assets under management the new fund is doing has done some uh uh 18 Investments that these are some of the few Investments but has done 18 Investments like hockey Labs uh Astra protocol uh Bridge Network q and far few and far is one of the nft plays on uh near protocol as well so we have done notes nodes of Gala Avalanche helium done Bitcoin mining we have over 15 000 miners under us and we are continuously looking to invest you know you might have heard a lot of VCS have stopped investing while we have deployed five mil 10 million dollars including so we blockchain in the last four months itself because thankfully uh a multi strategy sees to it that our cash flows uh remain maintained and that's all from now if you guys have any questions I am ready to take them offline and thank you all for your time