Written by: Lyn Alden
Compiled by: AididiaoJP, Foresight News
Cypherpunks and traditional institutions have different views on Bitcoin stocks, but both have their reasons. Bitcoin must function as a free currency, but it is also perfectly reasonable for large amounts of capital to flow into Bitcoin.
Over the past year or so, Bitcoin's rise has been largely driven by the rise of listed companies' Bitcoin treasury strategies.
Although MicroStrategy pioneered this precedent as early as 2020, other companies have been slow to follow. However, after the Financial Accounting Standards Board (FASB) made a major update to the accounting treatment of Bitcoin on the balance sheet in 2023, 2024 and 2025 ushered in a new wave of Bitcoin treasury asset strategies.
This article explores this trend and analyzes its impact on the Bitcoin ecosystem as a whole. The article also explores topics related to Bitcoin as a medium of exchange and a store of value.
Why Bitcoin Stocks and Bonds?
As early as August 2024, when this trend was still in its infancy, I wrote an article entitled (A New Look at Corporate Treasury Strategy), explaining the practicality of Bitcoin as a corporate treasury asset. At that time, only a few companies adopted this strategy on a large scale, and since then, more and more new and existing companies have begun to adopt this strategy. And those companies that adopted this strategy on a large scale early on, such as MicroStrategy and Metaplanet, have seen significant increases in their stock prices and market capitalization.
The article explains why companies should consider implementing this strategy. But what about investors? Why is this strategy so attractive to them? From an investor's perspective, why buy Bitcoin stocks instead of buying Bitcoin directly? There are several main reasons.
Bitcoin Stocks, Reason 1: Restricted Capital
There are trillions of dollars of custodial capital globally, and some of this capital has strict investment restrictions.
For example, some stock funds can only be used to buy stocks, and cannot buy bonds, ETFs, commodities or other assets. Similarly, some bond funds can only buy bonds. Of course, there are more specific restrictions, such as fund managers only being able to buy healthcare stocks or non-investment grade bonds.
Some of these fund managers are optimistic about Bitcoin, and many even hold Bitcoin themselves. But they cannot get direct Bitcoin exposure through the fund. However, if someone issues a stock with Bitcoin on its balance sheet (Bitcoin stock), or issues convertible bonds for a company with Bitcoin on its balance sheet, they can bypass the restrictions to buy. This is a previously untapped market, which is now gradually being explored in the United States, Japan, the United Kingdom, South Korea and other places.
I have been doing real-money model portfolios since 2018 so that readers can track my holdings.
In early 2020, I strongly recommended Bitcoin as an investment and invested myself. I wanted to add some Bitcoin exposure to my model portfolio, but at that time my brokerage account used for that portfolio could not buy Bitcoin or Bitcoin-related securities. I couldn't even buy the Grayscale Bitcoin Trust (GBTC) because it was traded over-the-counter and not listed on a major exchange.
Fortunately, MicroStrategy included Bitcoin on its balance sheet in August 2020. The stock is listed on NASDAQ and my model portfolio brokerage account can buy it directly. So considering the various limitations of the portfolio, I was happy to buy MSTR early, and this decision has yielded rich returns for nearly five years:
Later, brokerage accounts added the purchasable security GBTC, and of course, the main spot Bitcoin ETF. Nevertheless, I still hold MSTR in the portfolio.
In short, due to investment restrictions, many funds can only hold stocks or bonds with Bitcoin exposure, but not ETFs or similar securities. Bitcoin treasury companies ("Bitcoin stocks") provide them with an opportunity.
This does not conflict with Bitcoin as a self-custodied bearer asset for individuals, but complements it.
Bitcoin Stocks, Reason 2: Companies have ideal leverage
The basic strategy for companies to adopt Bitcoin as a treasury asset is to hold Bitcoin instead of cash equivalents. However, the first Bitcoin stocks tended to have extremely high confidence in this idea. Therefore, instead of just buying Bitcoin directly, they bought Bitcoin with leverage.
And listed companies happen to have better leverage tools than hedge funds and most other capital, specifically, they have the ability to issue corporate bonds.
Hedge funds and certain other capital usually use margin loans. They borrow money to buy more assets, but if the value of the assets falls too much relative to the amount borrowed, they will face a margin call. A margin call may force a hedge fund to sell assets when prices fall sharply, even if they firmly believe that these assets will recover and hit new highs. Being forced to sell high-quality assets at a low point is a disaster.
In contrast, companies can issue bonds, usually with a term of many years. If they hold Bitcoin and the price falls, they do not have to be forced to sell due to the fall in Bitcoin. This makes them more resistant to volatility than entities that rely on margin loans. Of course, there are still bearish scenarios that could force companies to liquidate, but these scenarios need to occur in a longer bear market, so they are less likely.
This long-term corporate leverage is generally better than leveraged ETFs. Since leveraged ETFs cannot use long-term debt and leverage is reset daily, volatility usually has an adverse effect.
What happens to a 2x leveraged ETF if the underlying asset has alternating fluctuations of +10% and -10% on the trading day? Over time, leveraged products gradually deteriorate relative to the index they track:
In fact, since its inception, the 2x leveraged Bitcoin ETF BITU has not really outperformed Bitcoin, even though Bitcoin's price has risen during this period. You might expect the 2x leveraged version to significantly outperform, but in reality it mainly increased volatility without bringing higher returns. Here is a chart of BITU's performance since its inception:
The same situation also appears in the long-term history of highly volatile stocks, such as 2x leveraged ETFs in the financial or energy sectors. During periods of volatility, they significantly underperform:
Therefore, unless you are a short-term trader, choosing intraday leverage usually has poor results. Volatility is very detrimental to leverage.
However, attaching long-term debt to assets does not usually cause the same problem. Appreciating assets with multi-year debt are an extremely attractive combination. Therefore, Bitcoin treasury companies are attractive securities for high-conviction Bitcoin bulls who want to increase returns with reasonably safe leverage.
Not everyone should use leverage, but those who choose to use leverage will naturally want to do so in an optimized way. Now there are Bitcoin treasury companies with various risk profiles, sizes, industries and jurisdictions, and real market demand is gradually being met.
Similarly, some of the securities issued by these companies, such as convertible bonds or preferred stock, can provide exposure to Bitcoin prices while reducing volatility. Diversified securities provide investors with the specific type of exposure they need.
The Impact of Bitcoin Treasury Companies on Bitcoin?
Now that we know why Bitcoin treasury companies exist and the market gap they fill for investors, the next question is: Are they beneficial to the Bitcoin network as a whole? Does their existence harm Bitcoin's value as free money?
First, it is necessary to clarify what the theoretical development path of a decentralized currency should be if it is successful. What steps need to be taken, and what is the approximate order?
Therefore, this section will be divided into two parts. The first part is an economic analysis of how a new form of currency becomes popular, that is, an analysis of what a successful path might look like. The second part is an analysis of whether companies promote or hinder this path.
Part 1: What would success look like?
"If a global, digital, sound, open source, programmable currency were to circulate from scratch, what would it look like?"
Ludwig Wittgenstein once asked a friend, "Tell me, why do people think it is more natural for the sun to revolve around the earth than for the earth to rotate?" The friend replied, "Well, obviously because it looks like the sun revolves around the earth." Ludwig asked back, "So, what would it look like if the earth looked like it was rotating?"
——(Wittgenstein's Money), Allen Farrington, 2020
Bitcoin was born in early 2009. During 2009 and 2010, some enthusiasts mined, collected, tested, bought and sold Bitcoin, or studied whether they could contribute to or improve it in some way. They were obsessed with the idea of Bitcoin.
In mid-2010, Satoshi Nakamoto himself described on the Bitcoin forum how to give Bitcoin initial value from scratch:
"As a thought experiment, suppose there is a precious metal that is as scarce as gold, but has the following characteristics:
Color monotonous and dull
Poor electrical conductivity
Not strong, and not very ductile or malleable
No practical or decorative use
And a special, magical property:
Can be transmitted through communication channels
If it acquires any value for some reason, anyone who wants to transfer wealth over a long distance can buy some to transmit, and the recipient can sell it."
After its initial success, Bitcoin's challenge was that the payment network spawned countless competitors. Countless altcoins emerged, which had similar functions, mainly that they could be bought, transmitted, and sold by the recipient. And stablecoins, launched in 2014, eliminated token volatility through dollar collateral.
In fact, the rise of competitors was the biggest reason why I didn't buy Bitcoin in early 2010. It's not that I was against the concept, but that I thought the industry was full of speculative bubbles and could be infinitely replicated. In other words, the supply of Bitcoin may be limited, but its idea is infinite.
But in the second half of 2010 I noticed one thing: Bitcoin's network effect is constantly developing. Like communication protocols, Bitcoin greatly benefits from network effects. The more people who use it, the more useful it becomes to others, which is a self-reinforcing cycle. And that's what holding Bitcoin is really about. The network effect must continue to grow to transcend this niche and crowded stage.
We can divide currencies into two categories:
The first type is "situational currency", which refers to a currency that can solve specific problems but is not widely used in other aspects. An asset that can be purchased with local currency, transmitted through high slippage (capital controls, payment platform bans, etc.), and sold or exchanged for local currency by the recipient. It has value, but success in this regard does not necessarily lead to wider success.
The second type is "universal currency", which refers to a currency that is widely accepted in a specific region or industry. It is important that the recipient does not immediately sell or exchange it after receiving it; they will hold it as a cash balance and may reuse it elsewhere.
In order for a currency to become a universal currency, the spender must hold it for a long time, and the recipient must be willing to hold it. If a new universal currency is to rise, most people may first regard it as an investment because they believe that its purchasing power may appreciate, and then be willing to use it as a means of payment. At this time, they do not need to be persuaded to accept it as a means of payment, because they have already recognized the asset.
Bitcoin's simple and secure design (proof-of-work, fixed supply, limited scripting complexity, moderate node requirements, and decentralization left behind after the founder disappeared) and first-mover network effects give it the best liquidity and security, so many people want to buy and hold Bitcoin. So far, Bitcoin has been a great success in this regard: as a secure and portable store of value, users are free to choose to spend or exchange it.
A secure, liquid, convertible, and portable store of value is between a situational currency and a universal currency. Unlike situational currencies, people think of universal currencies as a long-term asset to hold, not just to sell or exchange immediately after receiving. But unlike universal currencies, it is not yet widely accepted in most regions, as the number of people who take the time to study it is still small.
This stage will take a long time to complete due to volatility and the scale of existing network effects faced by Bitcoin, as people's spending and liabilities are denominated in existing currencies.
If a new monetary network with independent units (i.e., not pegged as a credit rail to an existing currency, but a system completely parallel to a central bank) is to grow from scratch to a large scale, it needs upward volatility. Any appreciating asset with upward volatility will attract speculators, which will inevitably lead to periods of downward volatility. In other words, it will look like this:
In its adoption phase, it is a defective form of currency in the short term. If you receive some Bitcoin and want to use it to pay your rent at the end of the month, neither you nor your landlord can afford it to fall 20% in a month. The landlord's expenses depend on the network effects of existing fiat currencies; she needs to know the value of the rent received from tenants. And you, as a tenant, need to ensure that you can pay your rent at the end of the month with a currency that does not depreciate quickly.
Therefore, Bitcoin is mainly regarded as an investment in this era. Believers are more likely to be willing to use it for payments. People with specific payment problems (such as capital controls, payment platform bans, etc.) are also more likely to be willing to use it, although they are increasingly choosing stablecoins with similar liquidity for payments. If you are only using stablecoins in the short term, their centralized nature does not matter.
Early Bitcoin supporters tried to persuade Bitcoin holders to use Bitcoin more. I don't think this is a sustainable approach. Bitcoin will not become popular as a charity. In order for it to be able to be sustainably popular on a large scale, it must solve the market's existing payment gap for spenders and recipients. And in the current adoption phase, this is not easy, especially since every transaction involves capital gains tax, while options such as stablecoins can meet short-term spending needs.
Having a sound, liquid, interchangeable, and portable store of value provides holders with some advantages that other assets cannot provide in its adoption phase. They can take Bitcoin anywhere in the world without relying on central counterparties and credit structures. It also allows holders to avoid significant capital attrition through cross-border payments (including recipients who are platform-banned). They may not be able to use Bitcoin to pay anytime, anywhere, but in most cases, they can find ways to exchange it for local currency, and in some cases, they can also use it to pay directly.
Imagine you are going to a country at random. What currency can you bring to ensure that you have enough purchasing power without relying on a global credit network? In other words, even if all your credit cards are deactivated, how can you ensure that you can still trade, even if it involves some capital attrition?
The best answer currently is usually physical US dollars. If you bring US dollars, although you may not be able to use them directly, it is easy to find someone willing to exchange them for local currency at a reasonable exchange rate and with sufficient liquidity.
Other answers might be gold and silver, as well as the euro. Similarly, in most countries it is not difficult to find brokers willing to accept gold and silver or euros and exchange them for fair local value.
The RMB, the Japanese Yen, the British Pound and some other currencies may also be alternatives, but they often face more capital attrition. I would put Bitcoin somewhere in the top ten, around 5th to 10th place, especially if you are going to a city center. Most cities have many exchange options where you can seek help if needed. Considering that Bitcoin is only 16 years old, this is already remarkable.
The next 160+ fiat currencies are very bad currencies outside of their own countries, and the vast majority of them are.
The US dollar is the most liquid currency in the world today. Smaller and less liquid assets are almost always priced in larger and more liquid assets. People use larger and more liquid currencies as units of account and price their main liabilities in them.
The dollar used to be defined in terms of a certain amount of gold. Eventually the dollar network became larger and more ubiquitous than gold, and the situation reversed: now gold is mainly priced in dollars. Bitcoin may surpass the dollar in this way in the long history, but it is far from reaching this level. What Bitcoin is priced in during the process does not matter; it is a bearer asset that can be priced in the largest and most liquid currency, and if one day it becomes the largest and most liquid currency, then other things will naturally be priced in it.
While people are free to psychologically price in any currency, most people will quickly price in Bitcoin. Critics describe this as a flaw of Bitcoin; a new decentralized monetary asset has no path to grow except by being denominated in existing currencies.
Part 2: How Companies and Bitcoin Stocks Mesh Together
As early as 2014, Pierre Rochard wrote a prescient article entitled (Speculative Attack).
A speculative attack in the foreign exchange market refers to borrowing a weak currency to buy more strong currencies or other high-quality assets. This is one of the reasons why central banks raise interest rates, and some countries resort to outright capital controls to prevent entities from arbitraging their poorly managed currencies.
Wikipedia provides a valid definition:
"In economics, a speculative attack is the sudden selling of unreliable assets by previously inactive speculators, and the corresponding acquisition of certain valuable assets (currency, gold)."
Due to Bitcoin's appreciation characteristics, various entities will eventually borrow money to buy more Bitcoin. At that time, Bitcoin's price was slightly above $600 and its market capitalization was slightly above $8 billion.
At first, borrowing money to buy Bitcoin was just a minority phenomenon. But now the Bitcoin network has high liquidity, a market capitalization of over $2 trillion, and billions of dollars in corporate bonds from mainstream capital markets are specifically used to buy Bitcoin.
Now, 11 years later, this phenomenon is commonplace. Is this good or bad for the Bitcoin network?
In my observation, there are two main types of critics who believe that this is detrimental to the Bitcoin network.
The first type of critics are Bitcoin users themselves. Many of them belong to the cypherpunk camp or the sovereignist camp. From their perspective, handing Bitcoin over to a custodian seems dangerous, or at least goes against the idea of a decentralized network. Some of them call corporate Bitcoin treasury supporters "suit Bitcoin enthusiasts", which I think is a good term. This Bitcoin camp prefers people to hold their own private keys. Some of them further say that the rehypothecation of major custodians may suppress prices or otherwise harm Bitcoin's value as free money. While I like the values of this camp, some of them seem to hold utopian dreams of everyone being as interested in completely controlling their own money as they are.
The second type of critics are usually people who have had negative views on Bitcoin in the past. They have been questioning Bitcoin for many years. As Bitcoin has become the best-performing asset and continues to hit new highs over many years and multiple cycles, some of them have changed their views and instead believe that "Bitcoin's price may be rising, but its value has already been captured." I give less weight to this camp than the first camp. This is similar to the permanent bears in the stock market, who, when their bearish arguments fail to materialize after a decade, turn around and say "the market is only up because the Fed printed too much money." My response is: "Well, yes, that's why you shouldn't be bearish."
What I want to say to both camps is: Some large capital choosing to hold Bitcoin does not mean that "libertarian" Bitcoin has been harmed in any way. It can be self-custodied and transferred peer-to-peer as usual. Moreover, as more types of entities hold it, the network becomes larger and less volatile, which also helps to improve its practicality as a peer-to-peer payment currency. It may also provide political cover to help policymakers mainstream it. If Bitcoin reaches this scale, the emergence of Bitcoin stocks and the phenomenon of large capital buying Bitcoin are inevitable.
One skill of permanent bears is to adjust the narrative at any time as needed, so that they are right no matter what happens. Bitcoin is defined by them as having no reasonable path to success. If Bitcoin stays at a niche level? Then its price increase and circulation capacity will be damaged, see, it has failed! If it is adopted by large entities and governments and continues to grow on a large scale? Then its value has been captured and has lost its way.
But if it is to become huge, widely accepted, and somehow change the world, how could this path not go through companies and governments?
Bitcoin's price propulsion has gone through several major stages.
In the first stage, people mined Bitcoin with their own computers, or sent money to Mt Gox to buy Bitcoin, and other early adopters' behaviors at cost. This is the early user stage.
In the second stage, especially after the collapse of Mt Gox, it became easier to buy and use Bitcoin. Exchanges in many countries made it easier than ever for people to buy Bitcoin. The first hardware wallets came out in 2014, making self-custody more secure. This is the retail buyer stage, and slippage when buying still exists, but is decreasing.
In the third stage, Bitcoin became widespread enough, liquid enough, and had a long enough track record to attract more institutions. Some entities have built institutional-grade custody services for it, listed companies have begun to buy Bitcoin, and various ETFs and other financial products have been launched, enabling various funds and custodial capital to gain exposure. Some countries, such as the Kingdom of Bhutan, El Salvador, and the United Arab Emirates, mine or buy and hold Bitcoin at the sovereign level. Other countries, such as the United States, choose to hold their confiscated Bitcoin instead of selling it directly.
Fortunately, although companies are currently the main buyers, retail investors are still free to buy Bitcoin without any slippage.
I have heard people say: "I thought Bitcoin was for the people, a peer-to-peer payment cash, but now it's all large companies holding it." Bitcoin is indeed for the people, and anyone with internet access can buy, hold or transfer it.
That's why I agree with both the cypherpunk's point of view and the suit Bitcoin enthusiast's point of view. I want Bitcoin to function as a free currency, which is also an important reason why I became a general partner of Ego Death Capital. We fund startups that build solutions for the Bitcoin network and its users. This is also why I support the Human Rights Foundation and other non-profit organizations that fund developers and educators, focusing on providing financial tools for people in inflationary environments. However, once companies, investment funds, and even sovereign entities understand Bitcoin, it is also reasonable for them to buy Bitcoin, which has now come into their view.
It is important to remember that most people are not active investors. They don't buy stocks, and they don't deeply analyze the difference between Bitcoin and other cryptocurrencies. If they speculate on an asset as traders, they are likely to buy at the top and get washed out at the bottom. Their investments are often passively allocated, not chosen by themselves. In the past, it was usually pension funds that made allocations. Today, it is usually financial advisors who make investments.
In my opinion, it is unreasonable to expect billions of people to actively buy Bitcoin. However, it is reasonable to strive to lower the barrier to entry through technical solutions and educational resources, so that anyone can choose to be exposed to Bitcoin.
The best statement I have seen is: "Bitcoin is for anyone, not for everyone." In practice, this means that everyone should be guided to understand Bitcoin, but only a portion of people will choose to accept it.
Summary of key points
The development of Bitcoin monetization is roughly as follows:
Bitcoin was initially a collection for enthusiasts and people with dreams of change, a new technology that could potentially provide some value to people.
Bitcoin began to become a situational medium of exchange, even used by pragmatists who otherwise didn't pay attention to it. For example, when funds need to be sent to a country with capital controls, Bitcoin can be transferred when other payment channels fail. Bitcoin can be a good solution when you need to receive payments or donations but are blocked by major online payment platforms like WikiLeaks.
Various purchasing costs such as high volatility, countless competitors, and capital gains taxes have hindered the continued growth of Bitcoin as a common medium of exchange. If you pay merchants who do not hold Bitcoin with Bitcoin, and they automatically exchange it for fiat currency, then the benefits of Bitcoin cannot be fully realized.
Bitcoin is more widely regarded as an ideal portable appreciating capital. Unlike other cryptocurrencies, it has achieved decentralization, security, simplicity, scarcity and scalability, making it an asset worth holding for the long term. While it is not always easy to buy coffee with it, it has begun to enter the ranks of the top ten bearer assets that can be carried and exchanged into local value without obstacles when traveling internationally, surpassing the vast majority of fiat currencies.
The Bitcoin network has enough liquidity, scale, and persistence to attract the active attention of companies and governments. A large amount of custodial capital is interested in this asset, and companies and funds provide them with indirect access to Bitcoin. At the same time, Bitcoin continues to exist as an open and permissionless network, which means that individuals also continue to use and build it.
If the Bitcoin network continues to expand, they may achieve:
As the Bitcoin network becomes larger, more liquid, and less volatile, it will become more attractive to large sovereign entities. Initially, Bitcoin was just an asset invested by small sovereign funds, and it may eventually become a large-scale foreign exchange reserve or an international settlement means. Countries have been trying to build closed-source code alternative payment methods, but adoption rates are low and there is a lack of consensus, while this open-source settlement network with independent units and limited supply is gradually penetrating globally.
Overall, I still think Bitcoin is in good shape technically and economically, and its adoption path is expanding as expected.
