Reflections

Subject: Reflections

To: Limited Partners of Grasshopper Capital Fund I LP
From: Ari Lewis and Sagar Rambhia
Date: 01/31/18

Reflections

New Years is always a time for reflection. For the cryptocurrency industry, 2017 was its coming out year. The cryptocurrency market cap increased ~3000% while Bitcoin increased ~1500%. For any asset class, gains like these are unprecedented. The big question is will it continue? We believe yes and the month of January reinforced that answer for us. Famous companies such as Kodak announced they were launching their own coin while asset management firms such as Direxion announced cryptocurrency ETFs. Founder’s Fund, Peter Thiel’s venture firm, announced a large position in Bitcoin and the founder of Ripple was briefly the richest man in the world due to the appreciation of Ripple’s value. These are all signs of cryptocurrency becoming mainstream. Robinhood also launched their own cryptocurrency brokerage to make it easier for people to invest in Bitcoin, Ethereum and Litecoin with no fees. Katy Perry put cryptocurrency on her fingernails and Mark Zuckerberg mentioned cryptocurrency in his annual review.

There still are many problems in the industry. You have tokens like TRON reaching a $14B network value with a stolen white paper and no product. Many publicly traded companies are adding blockchain to their name without any plans to actually be in the cryptocurrency business. For example, Long Island Iced Tea company changed its name to Long Island Blockchain. We do not know how a beverage company is going to use blockchain, but its shareholders were ignorantly elated when its stock was up +183%. We see federal regulators stepping in and warning against both companies that engage in pump-and-dump behavior as well as ICOs that are not registering as proper securities. Ultimately, we are optimistic for 2018 and think the bad actors that come with any budding industry will be sanctioned while pure-of-heart creators’ and their products will flourish. 
 
 Trading Positions

We decided to sell our entire Litecoin position. The decision rested on Charlie Lee, creator of Litecoin, liquidating his entire Litecoin position. We believe it’s important that someone who is quasi CEO of the cryptocurrency should have a vested interest in the cryptocurrency. In addition to this factor, we believe Charlie Lee has made no attempts to differentiate from Bitcoin and continues to promote Bitcoin despite it being a direct competitor to Litecoin.

Thanks,

Ari & Sagar