In this article, we will take a look at the top 10 investments of Balaji Srinivasan and see his thoughts on China’s ability to undermine crypto. You can skip our detailed discussion on these companies and go to Balaji Srinivasan’s Prediction On China’s Role in Crypto Crash and His Top 5 Investments.
Crypto stocks have taken a hammering over the past week as environmental concerns related to crypto mining and governmental scrutiny on crypto transactions hit the big names in the crypto world. Bitcoin, the most popular cryptocurrency, has fallen in value by more than 20% since the beginning of the month. Ethereum, the second most popular crypto coin, has also seen value plummet. Coinbase Global, Inc. (NASDAQ: COIN), the largest crypto exchange in the world, which primarily trades in these two currencies, has witnessed its stock value fall as well. User reports on Coinbase Global, Inc. (NASDAQ: COIN) outages have increased too.
The freefall started late last week when Tesla, Inc. (NASDAQ: TSLA) owner Elon Musk took to social networking platform Twitter, Inc. (NYSE: TWTR) to question the energy usage of cryptocurrency mining and their impact on the environment. Tesla, Inc. (NASDAQ: TSLA), which had earlier been responsible for a record Bitcoin rally after buying more than $1 billion in Bitcoin and announcing it would start accepting it as payment for vehicle sales, also suspended Bitcoin payments at the firm following the tweets.
This was followed by reports in the international media that the Chinese government had placed restrictions on crypto transactions, further hitting the firms that had bet big on crypto, like Square, Inc. (NYSE: SQ), the financial services company founded by Twitter, Inc. (NYSE: TWTR) owner Jack Dorsey. Square, Inc. (NYSE: SQ) facilitates crypto transactions on its network and has hundreds of millions invested in the blockchain technology. The firm has seen share price drop by more than 3% following the developments this week.
The stock of other firms with crypto bets, like PayPal Holdings, Inc. (NASDAQ: PYPL), also fell. PayPal Holdings, Inc. (NASDAQ: PYPL), which facilitates electronic money transfers across borders and has hundreds of millions of users, saw share price fall close to 2% this week. Despite the setbacks, all is not doom and gloom in the crypto world. In fact, market experts had warned of this slide in advance. Balaji Srinivasan, a crypto guru and angel investor who has gained a fan following for his investment exploits, in an interview in March, had said that a Chinese crackdown on blockchain was inevitable.
In his interview with Tim Ferriss, Srinivasan said that the internet firewall which operates in China, filtering out material not approved by Beijing, would be the pretext for an operation against blockchain mining in China because of the global nature of the blockchain technology. On May 18, the People’s Bank of China issued a warning to Chinese finance institutions facilitating transactions in virtual currencies. Coin mining operations, which were huge in China as crypto was taking off in the latter part of the last decade, have been banned in the country since 2017.
Here’s what Srinivasan said about this matter in the interview when asked about the worst-case scenario for Bitcoin and other cryptocurrencies.
“So I think that for BTC, because like a 10-year-old protocol, the attack on BTC that I think would be the most likely is that the Chinese put up the great firewall against it. So it’s a network level attack as opposed to a mining attack, because the thing is that Bitcoin assumes that every node can reach every other node or every mining node can reach every other mining node. And so it assumes a global intranet.”
“If you put up the firewall, you can work out the kind of predator/prey on this, but they block port A333 and the Bitcoin devs do port randomization. And then they do deep packet inspection, and these guys do tunneling to try to put it over a stage, through GPS, there’s a back and forth that can happen there. I think at the end of the day, the firewall is pretty sophisticated. That plus domestic penalties may make it challenging for people to maintain a blockchain indefinitely in China, or what happens is they mine, the China chain and the rest of the world chain is also being mined. And there’s like a peekaboo problem where they sync up every once in a while. And because the China chain would have more mining, the rest of the world chain would have less mining. All the blocks mine, the rest of the world would get thrown away with a chain reorganization, the China chain would basically periodically throw away every transaction that’s happening in the rest of the world. That would be like the worst case scenario where, remember, two things would have to happen there. First, they’d have to put up the firewall. And second, they would have to allow Chinese mining to continue.” [Source: The Tim Ferriss Show podcast transcript]
However, Srinivasan is still bullish on crypto in general. In fact, he is one of the few famous investors with great exposure to crypto assets and regularly advocates for the wider adoption of the new technology. This has given him handsome returns on his smart crypto investments. However, the same cannot be said of the finance world, which is going in the opposite direction. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, here is our list of the top 10 investments of Balaji Srinivasan.
Top Investments of Balaji Srinivasan
Soylent is a California-based company that offers meat replacement products. It was founded in 2013 as a crowdfunding project and is placed tenth on our list of top 10 investments of Balaji Srinivasan. Over a period of four years, the company managed to raise more than $133 million in funding through seven rounds. These rounds were led by Andreessen Horowitz, where Srinivasan worked as a partner, and Initialized Capital. The company has grown over the years and is now valued at over $500 million.
In March, Soylent announced that it was expanding a partnership with Walgreens Boots Alliance, Inc. (NASDAQ: WBA), an Illinois-based pharmacy-led retail firm, for the distribution of products at Walgreens across the United States. Walgreens Boots Alliance, Inc. (NASDAQ: WBA) is one of the largest retail chains in the US.
At the end of the fourth quarter of 2020, 36 hedge funds in the database of Insider Monkey held stakes worth $609 million in Walgreens Boots Alliance, Inc. (NASDAQ: WBA), up from 33 the preceding quarter worth $285 million.
“Walgreens Boots Alliance, Inc. has been essentially flat during our brief holding period. We have successfully owned Walgreens in the past. Recently, its share price has been pressured on concerns that Amazon may enter the prescription drug distribution business. As recently as 2015, Walgreens was a market favorite, trading at more than 20 times forward earnings. The company was expected to grow in good times and bad. Walgreens Boots Alliance, Inc. (NASDAQ: WBA)’s new clinics, designed to treat day-to-day healthcare needs such as flu shots and children’s ear infections, could be part of the solution for expensive emergency room overcrowding. Finally, trends toward generic pharmaceutics that began in 2015 are still considered a positive, as pharmacies have more influence in directing customers toward particular generics than with a patient seeking a patented drug prescribed by a doctor. Walgreens will face new competition going forward, but with its current depressed valuation, we believe the threats are more than discounted in an attractive stock price.”
Counsyl is a California-based health technology company founded in 2008. It is placed ninth on our list of top 10 investments of Balaji Srinivasan. Srinivasan was one of the founding members of the firm that primarily uses cutting-edge technology to inform people about disease risks through DNA profiling. The company managed to raise more than $237 million in nine funding rounds by 2017, with Pilot Growth Equity, Felicis Ventures, and SharesPost Investment Management leading these investments.
Counsyl was acquired by Utah-based molecular diagnostics company Myriad Genetics, Inc. (NASDAQ: MYGN) for $375 million in 2018. Myriad Genetics, Inc. (NASDAQ: MYGN) has a market cap of over $2 billion. Like Tesla, Inc. (NASDAQ: TSLA), Twitter, Inc. (NYSE: TWTR), Square, Inc. (NYSE: SQ) and PayPal Holdings, Inc. (NASDAQ: PYPL), Myriad is one of the best long-term tech stocks to buy.
Out of the hedge funds being tracked by Insider Monkey, Boston-based investment firm Camber Capital Management is a leading shareholder in Myriad Genetics, Inc. (NASDAQ: MYGN) with 3 million shares worth more than $91 million.
Nakamoto is a community-driven news network that focuses on developments related to cryptocurrencies and blockchain technology. Srinivasan is a founding member of the organization. Nakamoto operates through a hub of social media, community engagement and internet-based content platforms to gather crypto-related updates. The news network was named after Satoshi Nakamoto, the creator of Bitcoin, the most popular and valuable cryptocurrency in the world.
Another popular news network for crypto and finance news is CNBC, a news channel owned by Comcast Corporation (NASDAQ: CMCSA) in the United States. Comcast Corporation (NASDAQ: CMCSA) has a market cap of $250 billion and posted more than $103 billion in annual revenue in 2020.
At the end of the fourth quarter of 2020, 84 hedge funds in the database of Insider Monkey held stakes worth $8.8 billion in Comcast Corporation (NASDAQ: CMCSA), up from 82 the preceding quarter worth $8.1 billion.
In its Q1 2021 investor letter, Nelson Capital Management, an asset management firm, highlighted a few stocks and Comcast Corporation (NASDAQ: CMCSA) was one of them. Here is what the fund said:
“Comcast Corporation (NASDAQ: CMCSA) is the Largest cable provider in t he U.S. and is the dominant internet access provider in the markets it serves. Though Comcast will likely see further declines in cable subscriptions due to ongoing cord-cutting, it should be able to off set that lost revenue by growing internet access customers and instituting higher pricing. The pandemic has increased the importance of a fast internet connection, with more content streaming to homes at increasingly higher quality. Comcast Corporation (NASDAQ: CMCSA) made significant upgrades early on, allowing it to quickly deploy new technology and increase speeds to meet t he evolving needs of its customers.”
Teleport is a California-based company that primarily operates as a platform offering users the ability to suggest the best places to live or to work by running their preferences through an online database. The company was founded in 2015 and is placed seventh on our list of top 10 investments of Balaji Srinivasan. Srinivasan was a founding member of the company that raised close to $2.5 million in funding over the seed round before being acquired by MOVE Guides for an undisclosed sum. Teleport had been a success story when it was purchased, boasting a catalog of more than a quarter of a million users.
Another company that runs a digital travel advisory is Seattle-based Expedia Group, Inc. (NASDAQ: EXPE) which has a market cap of over $25 billion. Expedia Group, Inc. (NASDAQ: EXPE) stock was given an Equal Weight rating by investment bank Morgan Stanley in March.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm D1 Capital Partners is a leading shareholder in Expedia Group, Inc. (NASDAQ: EXPE) with 5.1 million shares worth more than $891 million.
ZeroTier is a California-based software firm founded in 2011. It is ranked seventh on our list of top 10 investments of Balaji Srinivasan. Srinivasan has worked as an adviser with the firm that primarily connects electronic devices with universal software defined networking. It operates on a freemium model. Some of the products offered by the firm include ZeroTier One, Central, and LF. The company has raised more than $2 million in funding through three rounds. Anorak Ventures and Bonfire Ventures are the lead investors in the firm.
Another good option in the software industry is California-based development firm Unity Software Inc. (NYSE: U). On March 15, Unity Software Inc. (NYSE: U) was given a Buy rating by investment bank Goldman Sachs with a price target of $126. Like Tesla, Inc. (NASDAQ: TSLA), Twitter, Inc. (NYSE: TWTR), Square, Inc. (NYSE: SQ) and PayPal Holdings, Inc. (NASDAQ: PYPL), Unity is one of the best long-term tech stocks to buy.
At the end of the fourth quarter of 2020, 32 hedge funds in the database of Insider Monkey held stakes worth $11 billion in Unity Software Inc. (NYSE: U), down from 35 in the preceding quarter worth $6.7 billion.
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Disclosure: None. Balaji Srinivasan‘s Views on China’s Ability to Undermine Crypto and His Top 10 Investments is originally published on Insider Monkey.