Three cryptocurrency funds for the adventurous investor

I’ve tended to avoid making too many comments on the issue of cryptocurrencies, because frankly I don’t know enough about them. However, I’m not a disbeliever and accept that cryptocurrencies have multiple uses and, despite my reservations, it’s clear that they aren’t going away.

We are currently in a crypto winter, but prices haven’t gone to zero – it’s just felt like an especially savage tech sell off. When tech enthusiasm roars back, cryptocurrencies will be back in business.

With that in mind, adventurous investors might want to have a look at the listed cryptocurrency venture capital (VC) funds trading on the Aquis Exchange. Aquis isn’t the London Stock Exchange, but it’s a viable venue for all sorts of esoteric stocks.

I have invested in KR1 (AQSE: KR1), AQRU (AQSE: AQRU), and NFT Investments (AQSE: NFT). To varying degrees, they all share the same business model and raise capital to invest in other digital assets, decentralised finance startups, or early-stage businesses.

You could lose it all – but the upside could be huge

If, like me, you think there is something to cryptocurrencies and other digital assets, then putting a small amount of money into early stage venture capital funds makes sense. Always assume that you might lose it all if the VC proves to be useless – but the upside might be huge.

KR1, the biggest of the three funds, has had a spectacular roller-coaster ride. Until late 2021, shares traded under 20p but then exploded to 220p before collapsing back down to 25p a few weeks back. In the last few weeks its share price has doubled again.

There’s another reason why I focus on these funds – the relationship between net asset value (NAV), the share price and cash.

The easiest one to explain is NFT Investments, which invests in non-fungible tokens (NFTs) and the wider digital-assets market. I invested at launch in April 2021 and it’s been an absolutely terrible investment, collapsing in value from 5p to just under 1p. It currently trades at a market cap of around £9.7m but in the last set of accounts to 31 December, it had net assets of £34m. A decent chunk of that NAV is in investments which might be worth close to zero, but there was £21.9m in cash. Administrative expenses run at around £1.2m per annum, so there’s a decent chance that by the end of this year, the fund may still be worth less than 50% of its net cash – and some of those investments could actually be worth something.

It’s less clear-cut with AQRU, where the market cap is £13.63m. NAV at the end of October last year was £12.5m, of which around £10m at the group level was in cash and cash equivalents (these may include stablecoins). The administrative cash burn seems to be running at around £1.1m per annum.

KR1 isn’t a cash play as it doesn’t have too much – about £3.5m according to the end-of-December accounts. It might actually need some cash, given its burn rate. But the NAV is £185m versus the current market cap of…