Author: Prathik Desai

Compiled by: Block unicorn

In 2020, Strategy (then known as MicroStrategy) began exchanging debt and equity for Bitcoin. They acquired BTC and became the largest publicly traded Bitcoin holder.

Five years later, the company is still selling software, but the gross profit from operations continues to decline in its overall contribution. In 2024, the gross profit from operations fell to about 15% compared to 2023. In the first quarter of 2025, that figure dropped by 10% compared to the same period of the previous year. By 2025, Strategy's approach has been imitated, refined, and simplified, paving the way for over a hundred publicly listed entities to hold Bitcoin.

The strategy is simple: finance the business with low-cost debt, buy Bitcoin, wait for appreciation, and then issue more debt to buy more Bitcoin—this creates a self-reinforcing cycle that turns the corporate treasury into a leveraged crypto fund. Expired debt is settled by issuing new shares, diluting existing shareholders' equity. However, due to the rising value of the company's Bitcoin holdings, the stock price premium offsets this dilution.

Most companies following the Strategy have existing businesses that hope to enhance their balance sheets' returns through Bitcoin as an appreciating asset.

Strategy was purely about appreciation potential in the past, yet they did not want to bear the burden of building a physical business. They had no customers, no profit models, and no operational roadmaps. They only needed a balance sheet filled with Bitcoin assets, along with a financial shortcut to quickly enter the public market. Thus, Special Purpose Acquisition Companies (SPACs) came into being.

These Bitcoin transactions. They can negotiate valuations in advance and package them under a shell that complies with SEC regulations while avoiding the label of an investment fund.

The SPAC route makes it easier for companies to market their strategies to stakeholders and investors, as there is nothing else to promote besides Bitcoin.

Do you remember what happened when Meta and Microsoft considered adding Bitcoin to their treasury? They faced overwhelming rejection.

For public market investors, SPACs are seen as a tool to provide pure Bitcoin exposure without directly dealing with cryptocurrencies. Similar to buying a gold ETF.

SPACs do face challenges with retail investor adoption, who are more inclined to gain Bitcoin exposure through more popular avenues like exchange-traded funds (ETFs). A 2025 institutional investor digital asset survey showed that 60% of investors prefer to gain cryptocurrency exposure through registered instruments like ETFs.

Nevertheless, demand still exists. Because this model fully leverages the potential of leverage.

Strategy did not stop at a one-time purchase when buying Bitcoin. It continues to issue more convertible bonds, which are likely to be redeemed by issuing new shares. This approach transformed a formerly business intelligence platform into a Bitcoin accelerator. During the rise in stock price, its performance even exceeded Bitcoin itself. This blueprint left a profound impression on investors. SPAC-based Bitcoin companies can also provide the same acceleration effect: buy Bitcoin, then issue more shares or debt to buy more Bitcoin. This cycle continues, creating a closed loop.

When a new Bitcoin company announces a $1 billion PIPE (Private Investment in Public Equity) backed by institutional support, it showcases to the market that real money is paying attention. For example, Twenty One Capital gained significant market trust with the backing of heavyweight institutions like Cantor Fitzgerald, Tether, and Softbank.

SPACs allow founders to achieve this goal early in the company's lifecycle without first building a revenue-generating product. Early institutional endorsements help attract attention, capital, and momentum, with fewer barriers compared to the investor resistance that publicly listed companies may face.

For many founders, the SPAC route offers flexibility. Unlike the more stringent disclosure timelines and pricing of an IPO, SPACs provide more control over narrative, forecasts, and valuation negotiations. Founders can tell a forward-looking story, create capital plans, retain equity, and avoid the cumbersome process of traditional VC to IPO financing.

The packaging of a SPAC is part of its appeal. Going public is a well-known language. Stock codes can be traded by hedge funds, added to retail platforms, and what you are actually purchasing and how much is still very important.