Invest in cryptocurrencies like mining services says billionaire Alex Waislitz

Billionaire Alex Waislitz is a big believer in cryptocurrency but says he has a particular strategy for making money from it.

Alex Waislitz says lessons learned from mining can be applied to cryptocurrencies. Picture: Aaron Francis

Billionaire investor Alex Waislitz is a big believer in cryptocurrency but says he is treating it like mining, investing in companies servicing the fast-growing sector rather than the “risk of volatility” of day-to-day trading in the actual currencies.

Mr Waislitz has made a string of crypto related investments in recent months, earning big returns on what he has dubbed “the mining services” firms operating in the sector.

“We said we never wanted to be a pure [mining] explorer and ride the blue sky on that, it is not our particular skill, he told a Morgans Financial podcast released this week,

“However, we can see those mining companies need the bricks, the shovels and spades, and all the services that go with that. So we invested in mining services companies. They were very profitable, without the direct speculative exposure. In the crypto space we have done the same thing.”

Mr Waislitz was a pre-IPO investor in Australian cryptocurrency payments firm Banxa, which listed on the TSX Venture Exchange in Canada earlier this year and has trebled in value.

Banxa offers payment services for cryptocurrency investors, converting normal currency to crypto via its gateway.

“It gets a transactional fee, and with the excitement over crypto and ethereum over this last period they are seeing their transaction volumes growing dramatically. We are pretty excited about it,” Mr Waislitz said.

“We also have an interest in crypto mining [Iris Energy which builds and operates Bitcoin mining centres], which also gives us an exposure to the ecosystem that is involved without the pure risk of the volatility of any one of those cryptocurrencies in terms of the day-to-day trading.”

A member of The List — Australia’s Richest 250, Mr Waislitz invests via his private Thorney Investments and the two listed investment companies, Thorney Opportunities and Thorney Technologies he controls – with a particular focus on pre-IPO technology companies.

It has proven to be a successful strategy, but there is a gap of roughly 15-20 per cent between the value of the LIC’s net tangible assets and the value of their shares, despite aggressive valuations or strong share price rises for many of the tech-focused investments Mr Waislitz had made.

The likes of Spirit Technology Solutions, which has trebled in a year, have been good investments for the Thorney listed stock portfolio. Private investments that have increased in value include eToro, the Israeli foreign exchange and contracts-for-difference broker that will go public via a merger with special purpose acquisitions company FinTech Acquisition Corp V in a $US10.4bn deal and list on the Nasdaq.

While he remains frustrated by the NTA gap for his LICs, Mr Waislitz said high valuation multiples for tech stocks was a phenomenon that was here to stay and dismissed concerns of a pending correction.

“It is an exciting time to be an investor in all of this because there is the ability for new and early stage companies to achieve fantastic valuations in a short period of time because the potential is enormous.

“So when you ask if valuations have gone ahead of themselves or gone a bit crazy and is there going to be a massive pullback, I think you can question that. The trend and the growth in some of these companies that will be there for the long term is so formidable that you can understand why there is excitement about the valuations.”

Mr Waislitz also revealed how traditional valuation metrics have not been applied to technology companies

“(You look at) multiples of revenue … you’re looking at eyeballs and traffic on websites and then looking at assumptions of how you convert that traffic into actual tangible transactional business.

“You have to adapt with the world and those tech companies are making such inroads and having such an impact that you have to take a more ambitious approach.

“I guess we have taken the lead from the US — they are much more concerned about market share and being positioned for a land grab and they are betting the profits will follow in due course.”

Mr Waislitz also warned of the prospect of a rise in interest rates later in the year.

“I don’t think we will see interest rates at these historically low levels very much longer. Economies are bouncing back quite strongly. Broadly I think we are seeing (economic) growth coming in stronger than people anticipated.

“A certain amount of ... inflation is healthy but it may challenge some metrics, because the cost of capital is pushed up even off a low base from a percentage point of view it could be meaningful. So I think there is a reason to be excited in the short term but as always there will be a day of reckoning at some point.”

Originally published as Invest in cryptocurrencies like mining services says billionaire Alex Waislitz