Source: Why Twenty One Capital Is More About Volatility Than Bitcoin
Compiled & Edited by: Daisy, ChainCatcher
Editor's Note:
This article is compiled from an in-depth dialogue on the crypto podcast Unchained, hosted by Laura Shin with two guests—Jeff Park (former Jump Trading investor, now Director of Investments at 21Shares) and Mark Palmer (Bitwise analyst). The topic focuses on the new Bitcoin holding company 21 Capital, co-founded by Tether, SoftBank, Bitfinex, and Cantor, aiming to enhance the Bitcoin per share (BPS) and Bitcoin return rate (BRR), seen as a new attempt at Bitcoin 'corporatization' following MicroStrategy.
The dialogue revolves around four core themes: the behavioral logic of strategic investors, Tether and the restructuring of global capital, the path of Japanese funds and U.S. Treasury arbitrage, and whether Solana has the potential to replicate Bitcoin's financialization model. The content covers multiple layers, including macro-financial trends, capital structure design, differences in investment preferences, and narrative capabilities.
The following content is a compilation and editing of the interview.
TL;DR:
Strategic investors focus on volatility rather than profitability; 21 Capital's stock pricing logic is based on volatility realization.
The establishment of 21 Capital marks a new phase of Bitcoin corporatization, initiated by several international institutions.
Tether is a beneficiary of dollar arbitrage, while SoftBank represents Japan's long-suppressed capital; both achieve global arbitrage through Bitcoin.
The shift in the U.S. regulatory environment is driving institutional entry, and stablecoin and digital asset legislation is seen as a critical window.
Investor choices are based not only on product structure but also reflect values and narrative preferences (Saylor vs. Mallers).
The financialization path of Solana has structural differences; its inflation mechanism, staking model, and asset credit are not comparable to Bitcoin.
Strategic companies do not focus on profitability but price based on volatility.
Laura Shin: Tether, Bitfinex, SoftBank, and Cantor Equity Partners jointly established the Bitcoin holding company 21 Capital, which operates similarly to MicroStrategy. The company initially holds 42,000 Bitcoins, valued at about $4 billion, making it the third largest holder of Bitcoin globally, aiming to enhance the Bitcoin per share (BPS) and Bitcoin return rate (BRR). What was your first reaction upon hearing this news? Jeff, please share first.
Jeff Park: My first reaction was shock. The institutional background of 21 Capital is very special, symbolizing the convergence of multiple global forces such as political, economic, capital, and social capital around Bitcoin. Led by Jack Mallers, this is a significant intergenerational and interdisciplinary collaboration, marking a pivotal moment in the reconstruction of the financial order around Bitcoin globally.
Laura Shin: Mark, what do you think?
Mark Palmer: This affirms Michael Saylor's strategy. He was the first to raise funds through the capital markets to buy Bitcoin in 2020, despite being questioned, but has now become a paradigm for the industry. New players like 21 Capital can learn from MicroStrategy's experiences, avoid its financing mistakes, and continue effective practices to further evolve their strategies.
Tether, SoftBank, and Bitcoin: A Global Arbitrage Game
Laura Shin: Tether may be the company with the highest per capita profits globally, with profits reaching $13 billion in 2024. In a context where interest rates may decline, it might have reached its peak profitability. Now, as the largest shareholder of 21 Capital, does this indicate a change in its strategic direction?
Mark Palmer: It is a reasonable choice for Tether to promote income diversification. Although the new business is not directly related to stablecoins, considering the potential stablecoin regulations that may be introduced in the U.S., this transformation is forward-looking. Tether has indicated it might establish a new business division for the U.S. market. Finding a friendlier operating environment between regulatory pressures and global expansion is a wise move.
Jeff Park: Tether is a new beneficiary of dollar hegemony, earning interest by holding U.S. Treasuries without having to pay interest to fund holders, which can be seen as a monetary loophole. Its combination with Bitcoin reflects global capital's demand for safe assets outside the U.S. system, and the structure of 21 Capital embodies this. Tether is also advancing projects like Plasma, trying to expand stablecoin functionalities based on Bitcoin. This is an important step towards diversification, with the ultimate goal of achieving true financial utility through the Bitcoin standard, reinjecting profits into the Bitcoin ecosystem, which has profound significance for the entire community.
Laura Shin: Jeff, you mentioned in the investor memo that Tether is the Eurodollar of the 21st century. Can you briefly explain the historical and geopolitical context behind this judgment in relation to SoftBank's involvement?
Jeff Park: The collaboration between Tether and SoftBank forms an ideal capital structure. SoftBank represents Japan's long-suppressed capital, accustomed to seeking growth through high-risk investments such as AI, ARM, and WeWork. Masayoshi Son refers to it as a '300-year plan.' Tether, on the other hand, is the biggest beneficiary of global financial repression, profiting through U.S. Treasury arbitrage. The combination of the two represents a collaboration between capital-exporting and capital-harvesting countries, with Bitcoin as their common bridge. In the future, similar 'public-private partnership' structures will increase, integrating sovereign capital while mitigating political risks. The triangular structure formed by Tether, SoftBank, and Cantor is an efficient and flexible model of capital collaboration.
Laura Shin: You mean Japanese capital seeks growth overseas, and Tether can export dollars to these demanders, the key being that it is not subject to U.S. regulation, right?
Jeff Park: That's right. Tether and Japan are both major buyers of U.S. Treasuries, but their profit-making methods differ: Tether earns interest directly, while Japan relies on interest rate differentials to allocate global assets. Bitcoin becomes a common countermeasure for both under the expectation of declining interest rates. Tether needs to find new profit sources, while SoftBank needs to release long-suppressed capital, and Bitcoin just happens to meet the needs of both sides. MicroStrategy opened the channel for leveraged financing in Bitcoin, while bringing in low-interest funds from Japan to invest in Bitcoin would be a form of global arbitrage, a path that Saylor has yet to realize.
Laura Shin: Mark, how do you view Jeff's analysis?
Mark Palmer: I completely agree. The core of global finance lies in matching capital seeking returns with assets capable of generating returns. Whether Tether can connect Japanese capital depends on whether institutions are willing to enter. The crypto market has been led by retail investors in the past, while institutions were hesitant due to unclear regulations. If the U.S. passes stablecoin and digital asset legislation, institutional funds will flow into the market. This is a crucial moment for global capital to position itself in crypto.
Saylor vs. Mallers: Are you investing in Bitcoin or faith?
Laura Shin: Some believe SoftBank's return to the crypto market could signal a top, especially considering Masayoshi Son lost $130 million in Bitcoin investments in 2017. What do you think?
Jeff Park: Many first-time entrants to the crypto market experience losses, but this often makes them more determined later on. Masayoshi Son is a typical macro trader; the Vision Fund itself is a macro platform. His early failures do not mean he won't succeed now. Today, top global macro investors like Druckenmiller, Dalio, and others have entered Bitcoin, and the market environment is markedly different from 2017. SoftBank excels at leveraging operations, and if it combines its capabilities with Bitcoin, the potential is enormous.
Mark Palmer: That's right; the market in 2017-2018 was still immature, and many people lost money. Now institutional participation is more rational; although Bitcoin remains speculative, its fundamentals have significantly improved.
Laura Shin: Finally, let's talk about Cantor. What do you think its strategic role is in listings and financial operations?
Mark Palmer: Cantor's involvement reflects Wall Street's changing attitude toward crypto. In the past, due to unclear regulations, they were hesitant; now, as policies turn friendly, banks can participate more securely while safeguarding client interests. The changing regulatory environment creates opportunities for them.
Jeff Park: I completely agree. Cantor serves as a bridge connecting the U.S. with global capital. In the context where neither Tether nor SoftBank is subject to U.S. regulation, Cantor realizes the binding of U.S. interests. This is also one of the reasons Tether chose to collaborate with Japan's SoftBank. As important allies, the U.S. and Japan form a triangular structure through Tether, SoftBank, and Cantor, tightly linking the financialization of Bitcoin with geopolitical strategy.
Laura Shin: We discussed geopolitics, regulatory changes, and market phases. What do you think about the timing of 21 Capital's entry? How does it differ from when MicroStrategy launched?
Jeff Park: In 2020, MicroStrategy's entry into Bitcoin coincided with heightened pandemic and inflation concerns; the entry of institutions like PayPal and the rise of DeFi made it an ideal time. Bitcoin's significant rise in 2021 validated this decision. Now, with the regulatory environment in the U.S. about to change, institutional funds are expected to enter, making it a highly favorable market entry time for 21 Capital.
Mark Palmer: The pandemic and loose policies in 2020 triggered people's unease about fiat currencies, leading Saylor to turn to Bitcoin. Japan is now experiencing a similar awakening. Despite long cooperating with the global order and maintaining the depreciation of the yen, it has been accused by the U.S. of manipulating exchange rates, causing domestic resentment and policy reflection. Bitcoin has once again become a hedging tool, a transformation reminiscent of those earlier days.
Laura Shin: While this does not constitute investment advice, how do you view products like Bitcoin spot ETFs, MicroStrategy, and 21 Capital in terms of which investors they are suitable for?
Jeff Park: The key lies in whether to accept leverage risk. MicroStrategy and 21 Capital provide leveraged exposure to Bitcoin, yielding higher returns when prices rise but greater volatility when they fall; ETFs are closer to spot prices and less volatile. Firmly bullish Bitcoin investors may consider leveraging tools for higher returns.
Mark Palmer: Investment choices depend not only on the products themselves but also on values. Some identify with the American ideals represented by Saylor, while others prefer the technical orientation and youthful vision embodied by Jack Mallers. 21 Capital, backed by international capital, may not be viewed as a 'purely American company'. As the return differences narrow, cultural identity and ideological alignment often determine the final choice.
Can Solana be financialized? Replicating the Bitcoin route is difficult.
Laura Shin: Among the many Bitcoin-related companies, which strategies or companies do you think are more likely to succeed?
Mark Palmer: The winners will be those companies that create the greatest volatility with the least capital. In an era of highly structured finance, the market favors volatility. MicroStrategy's capital structure is relatively complex, while 21 Capital focuses on a simpler structure; if it can bring higher volatility, the market may prefer it.
Jeff Park: I agree. Volatility is key, but the paths can differ. MicroStrategy expands financing channels to accommodate different investment preferences, such as convertible bond arbitrage funds. In contrast, 21 Capital opts for a simpler structure. Ultimately, it depends on which investor one is willing to follow—Saylor or Mallers. Jack Mallers possesses both technical and financial capabilities, as well as the influence of a 'preacher'.
Mark Palmer: In today's market, the ability to tell a story is crucial. Saylor excels at using language and metaphors to resonate, which is also an important factor in the company's success. Many projects based on Solana are beginning to value this as well; I often ask them, 'Who is your Chief Meme Officer?'
Laura Shin: What do you think about whether Solana can replicate Bitcoin's equity investment model? The differences in asset structure are significant; will this model perform differently on Solana?
Jeff Park: Solana and Bitcoin have essential structural differences. Bitcoin has a fixed supply, while Solana has an inflation mechanism, supporting staking and validating node operations, which can yield returns and flexibility. The core lies in the attributes of the asset itself, which determine its different valuation methods.
Laura Shin: So you believe that Solana's inflation mechanism may make such investment tools less attractive than Bitcoin, correct?
Jeff Park: It depends on investor preferences. Solana offers direct staking yields, while Bitcoin achieves compound growth indirectly through holdings, representing two different yield models.
Mark Palmer: This can be viewed from three aspects: first, credit adaptability; Bitcoin is easier to assess as collateral, while Solana's risk rating is still unstable; second, volatility; Solana is more intense, which can be beneficial for certain financial instruments; third, asset productivity; Bitcoin ETF structures are clear, while Solana relies more on actively managed firms to unlock its ecological value, especially given the unclear staking mechanism.
Laura Shin: So you believe that even if an asset is valuable, without a Chief Meme Officer, it is difficult to spark market enthusiasm, correct?
Mark Palmer: I completely agree.
