Latest news with #CosmoJiang
Axios
03-06-2025
- Business
- Axios
Digital asset treasuries: financial alchemy meets bitcoin
A number of public companies have recently made moves into acquiring bitcoin, and it's easy to see why — the market's been handsomely rewarding businesses that buy up digital assets. Why it matters: Digital asset treasury companies (DATs) are on the rise, giving investors an easy way to take leveraged bets on an inflection point for cryptocurrencies. The giant risk they pack just may be hard to see now when times are good. How it works: The core idea driving DAT investment philosophy is to trade an inflationary asset (dollars) for a scarce asset (cryptocurrency), particularly one believed to be catching on. The pitch to investors is that DATs are a better buy than a crypto-based exchange-traded fund because they'll grow holdings per share. ETFs, by contrast, simply buy and sell bitcoin (or other assets) as investors buy and sell the ETF. In short: If a DAT company's share represented, say, 1 bitcoin at purchase, it might be worth 1.5 in a couple years. Or that's the theory. Investors have been buying in Strategy (aka MicroStrategy, trading under MSTR), the leader in the DAT movement, has been trading at twice the value of its bitcoin holdings and its underlying business, according to analysis by VanEck. The company pioneered the notion of BTC yield — the rate at which BTC per share grows — and is targeting a rate of 4 to 8%. " Purchases into these vehicles effectively lock supply away, with a low likelihood of being sold because these are effectively one-way closed-end funds," Cosmo Jiang, of Pantera Capital, wrote in a letter disclosing investments the firm had made that reflect its conviction in this approach. The big picture: Investment strategies based on leverage — using borrowed capital to boost returns — always look great when prices are rising. Bitcoin, the biggest of all cryptocurrencies, just set a new all-time high, driven by massive institutional accumulation of the original virtual asset, both in the form of new crypto ETFs and in public companies with DATs. Strategy itself holds 580,250 bitcoin, 2.8% of all the maximum supply, a chunk currently worth about $60 billion. Risks hiding in plain sight But leveraged bets also carry risks, going up faster in good times, but dropping faster when things fall. And as we know, crypto does have a tendency to take a sharp turn for the worse from time to time, especially when buyers get swept up in hype around a trade that seems too good to be true. What they're saying: "Your fundamental premise here is 'sometimes people will buy $1 for $1.5 for no apparent reason [and] we think this can last forever,'" Nic Carter, partner at Castle Island Ventures, said of the DAT trend on social media. Carter compared it to another investment from the days before crypto ETFs, when the former premium on Grayscale's bitcoin trust — which traded for a long time above its notional value — eventually fell to a discount. Threat level: A big enough downturn in crypto prices, and a resulting drop in a DAT company's shares, could start a vicious cycle. For example, take Strategy. It's been financing its bitcoin purchases with zero-coupon convertible notes. Investors have essentially been lending it free money based on the expectation that they'll make out handsomely by converting the notes into sky-high Strategy shares down the road, and make money on the stock's short-term fluctuations along the way. But if bitcoin prices fall, and a DAT's stock doesn't perform, bond investors could instead demand their money back — in dollars — at the end of the term. Zoom in: This could present a problem. For many DAT companies, cash flow is scarce, and their crypto holdings are their most valuable assets. A prolonged downturn could force them to sell some of their crypto to repay their borrowings, which would accelerate a drop in crypto prices — perhaps enough to put the whole crypto market into bear mode again. State of play: Equity buyers should beware of the fact that most of the DAT firms have been engaging in flavors of financial alchemy. In Asia, a former hotel company reported a 225% yield on its bitcoin treasury holdings, which now total 8,888. MARA, the Bitcoin miner, has moved in as well. Cantor Fitzgerald, SoftBank and the stablecoin giant Tether backed a firm called Twenty One with 42,000 BTC (valued at $3.6 billion), and it aims to do the same. Other cryptocurrencies are getting brought in on the act, too. A few companies have announced the same strategy for solana, including Upexi, SOL Strategies and DeFi Development Corp. Just Monday, an ed tech company announced plans to raise $500 million with convertibles to build a solana treasury. What we're watching: The best positioned firms will be the ones that accumulated in the bad times.
Yahoo
29-05-2025
- Business
- Yahoo
Pantera Reveals Its Bets on Stocks That Adopted ‘Digital Asset Treasury' Strategy
Crypto investment firm Pantera Capital revealed a series of concentrated bets on a growing class of publicly-traded companies holding large digital asset reserves on Thursday. Among Pantera's portfolio is Twenty One Capital (CEP), a Bitcoin-focused treasury firm led by Jack Mallers and backed by Tether, Softbank and Cantor Fitzgerald, according to a note by general partner Cosmo Jiang. The firm also disclosed it is an early backer of DeFi Development Corp (DFDV), which applies the model to Solana SOL, and Sharplink Gaming (SBET), the Ethereum ETH treasury play supported by Ethereum software firm ConsenSys, per the note. This investment push signals Pantera's broader belief that traditional financial structures are increasingly viable pathways into digital assets, even as spot-based exchange-traded funds (ETF) and other regulated products expand. These firms —what Pantera calls Digital Asset Treasury companies, or DATs — seek to offer crypto exposure to equity market investors without requiring direct ownership of tokens, a play spearheaded by Michael Saylor's Strategy (MSTR). These stocks unlock crypto access for investors still wary of managing wallets or trading on crypto exchanges, Jiang argued. The companies function as closed-end funds on public markets, potentially limiting supply of the underlying assets — Bitcoin, Solana or Ethereum — and affecting price dynamics over time, he said. The note argued that under the right conditions — market volatility, financial engineering, and smart management — these companies can grow their token-per-share metrics faster than the tokens themselves appreciate, potentially offering more upside than direct crypto purchases. However, as the market is getting increasingly saturated with these offerings, a few analysts raised concerns about the long-term upside of these stocks: MSTR, for example, underperformed while bitcoin rose to fresh record highs this month, 10x Research in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
