Cypherpunk Holdings (CSE:HODL) recently closed a private placement to the tune of C$10m, the net proceeds of which are to be used to make investments in cryptocurrencies as well as companies and technology in this fast-evolving space. But who are Cypherpunk Holdings, and how do they fit into the rapidly changing world of crypto?
Here at The Armchair Trader we can see that interest in cryptocurrencies is increasing rapidly. While there are many specialist traders of cryptocurrencies as an asset class, there are limited avenues available for investors who want to get exposure to this industry – or you could call it an asset class – while it is still at a relatively early stage in its development.
Privacy is going to have a premium
Cypherpunk Holdings bases its investment thesis around the concept that privacy is going to have a premium going forward: maybe people are giving governments and companies too much information about themselves? This quest for privacy in the 21st century is a big driver in the popularity of cryptocurrencies like Bitcoin, but it goes further than this.
Cypherpunk is setting out to own a portfolio of both cryptocurrencies and companies and technologies that support this central thesis of financial privacy. The company is leveraging its network of contacts in the cryptocurrency field, blockchain and Silicon Valley to generate deal flow and secure preferential deals in the space. It is aiming to deliver investors easy exposure to the sector including direct exposure to cryptocurrencies.
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For starters Cypherpunk owns Bitcoin, and quite a lot of it too. The company is in the top 20 largest public holders of Bitcoin according to Bitcoin Treasuries. But beyond that it also has a number of equity stakes in private companies that are seeking to define the privacy and security of the cryptocurrency space. This includes Wasabi Wallet, the market leading desktop privacy wallet for Bitcoin, and Samourai Wallet, a secure and privacy-centric wallet currently available on mobiles with over 50,000 users.
But it’s not all about cryptocurrencies – Cypherpunk Holdings is also active in the wider market for privacy solutions. This is a core part of its mandate, so it should not be seen as a pure cryptocurrency play. We believe it is on the right trail here and that there is already emerging a considerable sector that deals in privacy for the individual.
IP addresses are in demand too
Last month Cypherpunk said it was formally engaging Heficed to buy at least 16,384 IPv4 addresses. They will become part of a long-term asset for the company and will be leased out via the IPXO platform, which will allow Cypherpunk to book operating income. The prices of IP addresses have been increasingly steadily over the last year, up by over 35%. A single IP address costs between $20 and $25 at the moment, but demand looks to be outstripping supply with large e-commerce platforms trying to buy up thousands of IP addresses behind the scenes.
As the Internet of Things gains traction, demand is forecast to only increase.
“When the internet was first created it was set to just over 4 billion IPv4 addresses,” says Tony Guoga, CEO of Cypherpunk Holdings. “Today, the world has run out of them and they have been allocated to a very small number of large technology companies or internet service providers. A new version of IP addresses called IPv6 has been created but the adoption rate has been extremely slow. Just like Bitcoin, the supply is limited and this is why we think this a very compelling investment, which we anticipate will yield a healthy return.”
In some respects Cypherpunk is acting as a holding company for a diverse portfolio of digital assets and technology, all centred around the theme of 21st privacy and the premium people are prepared to pay for it. Cypherpunk is an actively managed portfolio of assets in this space which it would be hard to replicate otherwise. We think it is a very interesting proposition and one to watch.