Source: TradingView, CNBC, Bloomberg, Messari
Facts Versus Myths About Crypto Treasury Companies
After six straight weeks of gains for the Bloomberg Galaxy Crypto Index (BGCI), the crypto market finally retreated last week, even as both equities and Treasuries gained. For all the talk about how broken the U.S. Treasury market is, it’s worth noting that the yield of the 10-year U.S. Treasury has essentially just been in a 100bps range trade for the past 2 years, yet another example of narrative overtaking facts.
Speaking of narratives, the rise of publicly traded U.S. companies buying Bitcoin and other digital assets has certainly been the talk of the town, but as usual, there are a lot of misconceptions. So we’ll do our best to parse through the facts and myths about these new buyers of digital assets.
Some are referring to these vehicles as “Bitcoin Treasury companies,” while others call them DATs (Digital Asset Treasury companies). Whatever you call them, they are basically just a new shell vehicle for holding digital assets. This differs from the original Bitcoin treasury companies. For well over five years, we’ve been discussing different public companies that were holding Bitcoin on their balance sheets for a variety of reasons. Some were regular companies that were experimenting with ownership of Bitcoin (i.e. Tesla and Block/Square), others were crypto-native companies like Coinbase and Galaxy that owned these assets via their natural business, and others were Bitcoin mining companies whose sole business was owning Bitcoin. The growth of Bitcoin on these balance sheets
was easy to track and occasionally sparked a boost to the stock price, but in most cases, the ownership of Bitcoin did not overshadow their core business. Furthermore, until recently, the
FASB accounting standards for holding Bitcoin on the balance sheet provided significantly more downside to EPS than upside. Conversely, these companies rarely provided a boost to the price of Bitcoin, because they were often not buying BTC on the open market. Most were simply accumulating it through regular everyday business, or for those who were buying it, it was a relatively small amount.
Source: BitcoinTreasuries.net
At the same time, Microstrategy (MSTR) was becoming the first true “Bitcoin company”, meaning its sole purpose as a public company was to acquire Bitcoin. We
first wrote about MSTR almost five years ago, as it opened eyes after announcing the first of many BTC purchases, leading to a 20% price jump for MSTR stock. This certainly opened eyes. As we wrote in August 2020:
“MSTR stock jumped 20% following the announcement last week, most likely leading to long weekends for junior employees at corporate finance departments around the world as they furiously research Bitcoin. Remember back in 2017 when companies would go out of their way to mention “blockchain” on earnings calls even with no knowledge or intention of how to actually use blockchain, simply because the market was rewarding companies for being ahead of the technology curve? Get ready for Bitcoin redux.”
While MSTR’s first BTC purchases were done using cash on the balance sheet, the true mastery of MSTR over the last five years shifted to how easily and frequently they tapped the capital markets. MSTR still had another core business, which generated anywhere from $50-150 million of EBITDA via its business intelligence and enterprise software analytics offerings, but this was quickly overshadowed by the Bitcoin purchases. The existing cash flow, which has nothing to do with Bitcoin, is a significant difference between MSTR and every other publicly traded equity vehicle that is now attempting to do the same thing.
Source: ChatGPT and Microstrategy financial reports
The cash flow from this ancillary (formerly core) business line enables MSTR to pay corporate expenses and interest on debt. By tapping the debt, convertible, preferred, and equity markets via new primary deals to buy Bitcoin, a whole new audience emerged that could now gain crypto exposure, which was previously unavailable.
Forgive my laziness (I generated this via ChatGPT rather than spend the time digging into each financing round because the exact details don’t matter for my argument), but MSTR’s mastery of the capital markets resulted in a 5-year stretch of pure capital markets wizardry:
Source: ChatGPT
Each subsequent round of financing, and Bitcoin purchase, added upward pressure to BTC’s price due to the size of these purchases and the signaling of future purchases, and also added to upward pressure on MSTR’s stock price as they made the market focus on “Bitcoin per share” and “Bitcoin yield”, new metrics that previously did not exist. Essentially, the sole goal of MSTR, the “company,” was now to grow its Bitcoin balance, and everyone along the way benefited. The convertible bond and preferred stock holders essentially were playing a “cheap vol” game, taking advantage of the volatility in both the MSTR stock and BTC’s price. The straight debt holders only cared about clipping their coupons, which was easy given the EBITDA that MSTR still generated from its old core business. And the equity investors benefited from the stock trading at a high premium to the net asset value (NAV) of Bitcoin on its balance sheet.
Everyone won! Of course, when everyone wins, two things happen:
- Naysayers begin to rage-post, trying to find ways to discredit the strategy. We first began addressing some of the ludicrous claims in 2021, when many market participants were convinced that MSTR would become a forced seller of Bitcoin, demonstrating a complete misunderstanding of how debt covenants work and an even greater confusion between owning Bitcoin outright versus holding levered futures positions with liquidation prices. To this day, we still often have to contend with claims that MSTR poses a systemic risk to BTC, although we’ve largely given up trying to fight this battle because it is never-ending. We wish Jim Chanos a lot of luck on his recent long BTC, short MSTR trade (which also likely will not work for reasons we lay out here). “Shorting MSTR” is the new “shorting Tether”, a trade that makes everyone salivate due to the obvious low risk, high reward, but has a low probability of actually working.
- The copycats emerge. Welcome to the new era of crypto insanity. Let’s dive in.
Source: Bloomberg and Arca Internal Calculations
If 2024 was the year of the “crypto ETF”, then 2025 will be the year of the “SPAC and Reverse Merger”. We once said that crypto ETFs were “
2 steps forward, one step back”:
“Many are calling the ETF a win for real-time settlement assets, but the opposite is actually true. The BTC ETFs just jammed a real-time settlement system (blockchain) into an antiquated T+1 settlement product (the ETF). Aren’t we going the wrong way? As an industry, we should be striving towards bringing the world’s assets on-chain, not bringing on-chain assets to Wall Street’s outdated rails
I also acknowledged that it was a necessary evil to further adoption and interest, but the point is still true. There is a big difference between “blockchain the technology” and “crypto the asset”. We care a lot more about bringing the world’s most popular assets (stocks, bonds, real estate) onto blockchain rails than we do about jamming crappy crypto assets into outdated rails. But jamming crypto assets into equity shells is not going to stop. So let’s examine what is happening.
SPACs and reverse mergers have been around for a long time, but rarely have they been unilaterally used for a single purpose. But that is what is happening right now. If you have a publicly traded equity shell, it can be used to acquire crypto, with the hope of trading at a significant premium to its net asset value (NAV). These are new and often structured a little differently than MSTR. Some own just BTC and are trying to copy MSTR to a tee (though with far less brand awareness and capital markets expertise), while others are buying new assets – some own ETH, some own SOL, some own TAO – and many more are coming. Arca is currently getting 3-5 calls per week from investment bankers pitching us new ideas.
Here are a few examples of recent deals announced and being funded (apologies as this may not be fully inclusive):
SharpLink Gaming (SBET)
- Recent Activity: May 2025
- Funding Method: $425 million private investment in public equity (PIPE) deal
- Crypto Acquired: Ethereum (ETH)
Trump Media & Technology Group (DJT)
- Recent Activity: May 2025
- Funding Methods: $2.3 billion through stock and convertible debt sales
- Crypto Acquired: Bitcoin (BTC)
GameStop Corp. (GME)
- Recent Activity: May 2025
- Funding Methods: $1.5 billion in convertible bonds
- Crypto Acquired: 4,710 BTC
Jetking Infotrain (India)
- Recent Activity: May 2025
- Funding Method: Rs 6.1 crore via equity sale
- Crypto Acquired: Bitcoin (BTC)
- Recent Activity: May 2025
- Funding Method: 150 million reais via equity sale
- Crypto Acquired: Bitcoin (BTC)
- Details: Brazilian fintech Meliuz announced a primary share offering intended to raise funds for acquiring Bitcoin. The company plans to distribute an initial tranche of 17,006,803 common shares, targeting a capital raise of 150 million reais (approximately $26.45 million).
Sol Strategies Inc. (CSE: HODL, OTCQX: CYFRF)
- Initial Investment: January 2025
- Funding Methods:
- CAD $25 million unsecured revolving credit facility from Chairman Antanas Guoga.
- C$27.5 million (~$20 million) via convertible debt from ParaFi Capital.
- Up to $500 million convertible note facility with ATW Partners, with an initial $20 million tranche closed in May 2025.
- Crypto Acquired: Solana (SOL)
Cantor Equity Partners / Twenty One Capital (CEP)
- Recent Activity: May 2025
- Funding Method: Added $100 million in funding to its crypto venture, Twenty One Capital, bringing total funding to $685 million. Bitcoin was also committed in kind to the new CEP structure via existing equity holders (Tether, Bitfinex, and Softbank.
- Crypto Acquired: Bitcoin (BTC)
Upexi Inc.
- Recent Activity: April 2025
- Funding Method: Raised $100 million to build a Solana reserve.
- Crypto Acquired: Solana (SOL)
- Details: $100m PIPE to purchase SOL, plans to continue to build “Sol-per-share” via equity and debt issuance.
DeFi Development Corp (formerly Janover)
- Recent Activity: April 2025
- Funding Method: Raised $42 million to create a Solana reserve treasury and seeking to raise $1 billion more.
- Crypto Acquired: Solana (SOL)
These examples illustrate a growing trend among public companies to incorporate crypto assets into their financial strategies, often using proceeds from debt or equity offerings to fund these acquisitions.
But who is actually making money on these? Let’s break it down:
- The investment bankers, getting underwriting fees for raising PIPEs, or executing a reverse merger, are a pretty riskless strategy for the,m regardless of the success or failure of the deal. So they aren’t going to stop bringing these deals.
- The owners/management of the shell companies - Let’s say you raise $100 million in a new PIPE offering, and use $85 million to buy crypto assets, and keep $15 million back for “operating expenses”. Operating expenses include higher salaries – that’s a fat payday for management teams.
- The existing owners of the stocks BEFORE the reverse merger or SPAC announcement – Most of these shell public companies are trading with sub-$20 million equity market caps. And most of the owners of these stocks, prior to being repurposed into crypto equity shells, were likely just penny stock traders or retail investors. Anyone who owned these stocks prior, knowing that the stock would be repurposed into a crypto company, was likely trading on insider information; everyone else was just getting lucky. But make no mistake about it, this is where the real money is being made, as most of these stocks are jumping 500-1000% or more upon announcement.
What group is missing from the “money makers?”. The new investors.
Unlike MSTR, where we now have 5 years of history showing that debt, convertible bond, preferred, and equity holders are making money, there is no evidence YET that new investors into these vehicles (those funding the PIPEs or SPACs) are going to make money. No one has lost money yet, as these deals are relatively new and most private investors in these vehicles have yet to convert their private shares to public shares (most take at least 90 days to do so). As a result, the deals will continue to come in, and investors will continue to buy them. And if shares do still trade at a significant premium to NAV once all new investors unlock, then we will see even more of these deals. But if these stocks start to trade straight down, maybe even below NAV, then the music stops.
We won’t know for a few more months as these unlocks start to emerge.
But one misconception is already floating around. These unlocks are risks to investors in the equity of these shells, NOT risks to the underlying crypto asset. There are few, if any, mechanisms to force sales of the underlying crypto asset unless you raise money via debt and can’t pay interest (default). And none of the newer shells are big enough yet to access the debt markets. That trade has been exclusive to MSTR, and a few other larger players thus far. Equity and preferred holders have no rights unless a stock trades so far below NAV that an activist investor begins accumulating shares and tries to force a board takeover with the goal of selling the underlying asset (crypto) to buy back the shares. This will likely happen at some point in the future, but it’s not a big risk today, and once it happens one time, most stocks will close the gap to NAV because they know the playbook can and will be repeated.
This is very similar to the Grayscale trusts prior to the ETFs. There was never a risk that Grayscale would be forced to sell its underlying crypto assets… The risk was that the trusts (stocks) would trade below their net asset value (NAV), which eventually happened, and was detrimental to equity investors but irrelevant for crypto asset holders.
And now, every crypto venture capital investor holding a massive amount of highly inflationary garbage tokens with massive unlocks and no secondary demand is discussing ways to stuff these tokens into an equity shell. But that doesn’t just automatically create demand, no different than how most new ETFs fail to garner demand. Creating a vehicle and creating demand are two separate things. The vehicles will continue to be created, but it is still too early to know if there will actually be demand for the stocks.
Is there a world where these vehicles can sustain a premium to a NAV? Yes. Perhaps one day MSTR becomes the “Berkshire Hathaway” of crypto, whereby Bitcoin becomes such a sought after, scarce asset that companies are willing to take less in an acquisition from Saylor than they would from another company because he is able to pay with precious Bitcoin. And perhaps the same is one day true about other assets being jammed into these shell vehicles. But that’s a long-shot idea. Another way a premium to NAV could sustain is if these shell companies get more creative with what underlying asset they own – maybe they start to own HYPE, one of the best tokens ever created that currently does not trade on any centralized exchanges, thus opening HYPE ownership up to a new investor audience that will be willing to pay a premium for access. But that’s about the only reason why a premium to NAV would persist over long periods of time.
Regardless, some will work, some will not – just like ETFs. But the bankers need to start getting creative if they want the gravy train to persist. If you’re just going to stuff crypto into an equity shell, you need to keep innovating on what is stuffed into the shell – make it valuable and hard to accumulate in any other way.
But I see little reason why these equity shells will be net negatives for crypto assets themselves, at least not anytime in the near future. Without debt in the capital structure, there is no forced sale mechanism. And I feel like we’ll be trying to diffuse misconceptions about these vehicles for a LONG time, just as we still do with many crypto topics.
Meanwhile, Tokens Can Still Be Used As Capital Formation
The recent move away from token raises, and into these shell equity raises, is once again 2 steps forward, 1 step back. But that doesn’t mean token sales aren’t happening too. They are just being discussed nearly as much.
We often say that “Tokens are the greatest capital formation and customer bootstrapping mechanism ever created, aligning all stakeholders and creating evangelists and power users for life”. The idea is simple – rather than issuing equity or debt, whereby your investors do not become users of your product, and your customers receive no benefit from the company's growth, why not issue tokens to your customers, aligning everyone at once? This is largely what ICOs were doing back in 2017 before U.S. regulators shut them all down.
The good news is that regulatory pressure is softening, allowing some of these token financings to come back. The bad news is that most of these are still being done only for “
dot-cryptos” - meaning crypto and blockchain native companies that would not exist if it weren’t for blockchain. What is missing is a world where NON-crypto native companies (meaning every day gym owners, restaurant owners, and small businesses) start issuing tokens to fund their businesses and align stakeholders.
“Internet Capital markets” is a term that describes this new, emerging theme. The idea is not new (again, we’ve been writing about this for 7 years – in fact
the first blog I ever wrote on crypto touched on this idea, and it was before Arca even had a website). But it is finally being adopted to some degree.
Launchcoin is one of the platforms powering this new launch of tokens. Launchcoin (which
has its own token) powers Believe, a token launchpad spearheading the emerging Internet Capital Markets narrative. Tokens debuted on Believe via bonding curves before graduating to Meteora for enhanced liquidity. The platform is compelling, as numerous credible Web2 businesses are tokenizing (creating tokens) through Believe. Although direct token value accrual isn't live yet, the potential is significant, positioning Launchcoin at the forefront of this narrative.
Said another way, Launchcoin and Believe are TRYING to bring this vision to life, where every municipality, university, small business owner, sports team and celebrity can issue a token.
But both are happening. And it’s important to understand the differences and nuances.
