Managing Directors' Report (Half Year 2024)
Since Bitcoins’ all-time high this Spring, the crypto markets have entered a period of consolidation, once again offering both seasoned and new investors valuable lessons in resilience and long-term thinking. As the crypto landscape continues to evolve, it provides an opportunity for market participants to strategise for the next growth phase.
As detailed in our most recent annual report, we continue to work hard with relevant policymakers, strategic partners, and the newly elected government, to support the United Kingdom in realising its ambition to become a global crypto-asset hub and remain competitive in the field. We firmly believe that the UK has the potential to be a leader where digital asset firms have the clarity needed to invest and innovate, while customers receive the necessary protection.
We recently witnessed the most comprehensive overhaul of rules for London-listed companies in over thirty years and the approval of Bitcoin and Ethereum Exchange Traded Notes for trading on the London Stock Exchange earlier this year. Those reforms present an opportune moment for the new government and the Financial Conduct Authority (“FCA”) to further embrace the potential of blockchain and digital assets, as the world rapidly shifts towards a new digital economy. Despite giant steps in the right direction, these developments merit further review to hopefully loosen the ‘blanket ban’ on crypto and digital asset firms being admitted to the FCA’s official list, which has been in place since the FCA’s Cryptoasset Taskforce report was published in October 2018.
In the UK and globally, we have seen the incredible impact of the internet on our daily lives, the economy and society. Tokenisation, blockchain-enabled technologies, and digital assets represent the next frontier of technological innovation, offering greater security, financial inclusion, diversity and competitiveness in consumer services. By streamlining regulations to foster an innovation-friendly environment, the UK can boost its global competitiveness and revitalise its stagnant capital markets by attracting global investment into homegrown talent, enabling significant growth opportunities for the country and the resulting trickle-down effect on its entire economy.
Outside of the UK, crypto and digital assets have become key topics in US politics, particularly among Republicans and their presidential candidate. Even Democrats, who have previously shown hostility towards digital assets, are seemingly changing their stance towards the industry. The shifting political landscape in Washington indicates a growing acceptance and strategic interest in digital assets, highlighting a pivotal moment for the industry, both in the US and globally.
Greatly boosted by the Company’s successful investment in Celestia, the half-year started strongly for the Company’s portfolio, surpassing previous end-of-year highs. However, following Bitcoin’s surge up to all-time highs, there has then been a lengthy period of consolidation, which has affected the crypto market and the Company’s portfolio. Fundamentally, the crypto ecosystem keeps pushing forward, with more developers joining and many important growth metrics continuing to improve. Ethereum’s roll-up-centric roadmap is playing out, greatly benefiting Celestia’s positioning. Celestia itself recently unveiled its updated roadmap, removing additional friction points for developers as well as a massive increase in data throughput. Polkadot, another major investment of the Company, is also continuing to take further steps towards executing on its recently updated technical roadmap with Polkadot ‘Plaza’, an improved version of Polkadot’s ‘Asset Hub’, and further progress on the ‘JAM’ protocol, which was unveiled earlier this year by Dr. Gavin Wood, Polkadot’s founder.
We have continued to allocate capital to great teams and projects, having made several investments to complement our portfolio so far this year. We invested in Avail, which is positioning itself as a unifying force for a rollup-centric blockchain ecosystem. Additionally, we supported Mode, which aims to bring decentralised finance on Ethereum to millions of users, through seed and follow-on funding. We also participated in the strategic funding round for Tanssi, a promising project within Polkadot that recently expanded into Ethereum’s rollup and restaking ecosystem. These investments reflect our commitment to backing innovative technologies with strong growth potential and our confidence in the teams’ abilities to drive the future of decentralised technologies. Further portfolio projects that are yet to be launched are Anoma, pioneering a new generation of blockchains optimised for seamless user experiences, and Redstone, which is seeing great adoption through partnerships and use cases across the entire crypto ecosystem.
The Company’s staking activities continued to deliver consistent income, amounting to £8.7 million for the first half of 2024. Through staking, the Company is contributing to the security of decentralised networks and, in return, is earning staking rewards, thereby compounding its holdings. This steady income stream highlights the strength and reliability of our staking strategy, significantly contributing to the Company’s overall financial performance and showcasing our ability to generate value for our shareholders.
Looking ahead, key catalysts that will dictate where crypto assets are heading will be the future outlook on interest rates across the globe as well as the US election outcome, resulting in a potentially more favourable regime for crypto in the US.
As we continue into 2024 and beyond, we want to thank our investors for their continued support as we keep building out a high-quality, ‘long-only’ portfolio of innovative digital assets. As in previous years, KR1 plc remains at the very heart of the thriving crypto ecosystem, fully focused on taking advantage of the disruption that this exciting technology will bring to society.
Excerpt taken from the half year results of KR1 plc for the six months ended 30 June 2024, published on the Company’s website and available as an announcement here.
