Written by: Joakim Book
Compiled by: AididiaoJP, Foresight News
As Wall Street initiates a hype cycle for Bitcoin treasury companies, and new 'Saylor competitors' emerge weekly, how should Bitcoin holders respond? In this late-stage fiat era, the mNAV (market capitalization to net asset value ratio) game and regulatory arbitrage are either a recipe for disaster or a blueprint for incredible wealth.
Michael Saylor and MicroStrategy have taken the lead, but suited corporate executives and businesses have entered the arena on a large scale: Bitcoin held in the form of Bitcoin treasury companies has a fascinating magic that more or less attracts everyone's attention.
What is a rational, normal, ordinary Bitcoin holder to do?
The easiest way to deal with Bitcoin treasury companies and financialized Bitcoin is to ignore them completely. Only time will tell whether these Bitcoin treasury companies and financial instruments will succeed or collapse spectacularly.
But in the world of money and finance (and economics more broadly), there is often no neutral option and no 'doing nothing'; my money and savings must flow somewhere, and my attention and labor must be focused on something. New Bitcoin treasury companies are being formed every week; aggressive financing or purchase announcements are being made every day. Being in this field, it is inevitable to have an opinion; and having a wise, well-informed opinion seems almost a moral obligation.
Over the years, I've delved deeply into monetary economics, financial history, and now Bitcoin's wild financial frontier, where the path of reason is quite narrow. On one side is the promise of quickly achieving the 'hyperbitcoinization' future we all envision, with corporate structures simply amplifying my Bitcoin holdings in the process; on the other is a quagmire of financial engineering and a breeding ground for speculative frenzy, quickly repackaging Bitcoin holders' fiat contributions as Bitcoin yields.
Why are Bitcoin holders involved in these companies?
Leverage is one reason. As a typical millennial, I don't own a house, so I can't easily get cheap debt (which is basically the only reason to own a house). I can pledge my Bitcoin through platforms like Firefish (6-9% APR) or borrow using credit cards (11% and 19% APR respectively). These conditions are not ideal; they are costly, the money pool is limited, and they are not cheap. Even if Bitcoin's compound annual growth rate (CAGR) is 30-60%, that's performance over a longer period, not monthly or annually, and the repayment cycle for these debts is precisely monthly or annually.
In comparison, MicroStrategy (MSTR) and Marathon Digital (MARA) issued convertible bonds at 0% interest rates. These debts mature in a few years and are worth hundreds of millions of dollars. As Pierre Rochard said to Jim Chanos in their debate last month:
'These are conditions that Saylor is able to get... that those holding Bitcoin in cold wallets don't have access to.'
For most Bitcoin holders, participating in this game is too tempting, even if you need to give up control and ownership and pay a high premium for owning shares in these companies.
As a leveraging mechanism, Saylor's move to preferred stock seems more expensive, paying 8-10% interest is already close to my own borrowing capacity, but they are safer. Preferred stock protects the company itself because it eliminates the risk of margin calls or debt-driven bankruptcy and gives the company unprecedented flexibility. Preferred stock provides a release valve because MicroStrategy can choose not to pay dividends on certain preferred stocks (e.g., STRD); for STRF, the 'cost' of not paying dividends is simply an additional 1% interest penalty in the future. In an emergency, MicroStrategy can even suspend dividend payments on other preferred stocks.
This is a paradox: While this is financial leverage for MicroStrategy (it can buy more Bitcoin with other people's money), it is not leverage for new shareholders of MSTR. As Jim Chanos responded to Rochard in that debate: The point of leverage is to gain exposure to more than $1. If I buy MSTR shares at an mNAV of 1.5, and MicroStrategy itself has leverage of about 20%, then I'm not amplifying leverage! (1/1.5 x 1.2 = 0.8). So, for every $1 I put into MSTR, I actually only get about $0.80 in Bitcoin exposure. And the company (of which these shares are a part) still needs to pay similar costs as I would to borrow money, to enjoy the privilege of using other people's funds.
For most other Bitcoin treasury companies, the calculation is even worse, mainly because of their excessive mNAV. Investors have become the source of returns pursued by Bitcoin treasury companies. When we invest in these companies, we are playing the fiat game. And the extent to which we play these games is directly proportional to the level of mNAV. I have asked many times:
'Why is one Bitcoin, once packaged in a corporate structure, suddenly worth two, three, or even ten times its most liquid, transparent, and unquestionable global price?'
Or more directly:
'When you enshrine our 'tokens' within the wings of financial leverage, and pledge to issue debt, preferred equity, and common equity upon its foundation, what extreme value accretion transformation has it undergone? We hear the ghost of Satoshi whisper: 'Bubble after bubble of credit creation.''
MicroStrategy's great discovery, now being frantically imitated by everyone, is simply to package Bitcoin in a corporate structure, add some leverage, and then sell it on Wall Street, thereby doubling the value of the same Bitcoin. Most discussions end here, with traditional financial journalists busy treating it as a trend or a bubble; according to the efficient market hypothesis or common sense, nothing should trade for more than the price of the only asset it holds.
But that's not enough. Let's list some reasonable reasons why shares of a company that only holds Bitcoin should be worth more than the Bitcoin it holds:
Storage: Self-custody is easier than you think, but many still shy away from it. Another strange reason is the high-profile 'wrench attacks' against Bitcoin holders worldwide; it's reasonable to pay a premium to have someone else custody your Bitcoin. No one can steal my MSTR shares. Saylor seems to know what he's doing, so let's 'store' our Bitcoin in his company, with a premium: 10%.
Future growth: Future Bitcoin is worth more than current Bitcoin. At any given time, there are undisclosed treasury company purchases accumulating value for shareholders but not yet publicly disclosed. Whenever you buy stock, you can only see transactions or acquisitions that have not yet been disclosed... but we all know, and can predict, that the stock should trade slightly higher than it does now: you are always trading stocks based on existing information, while clearly knowing that there is more going on behind the scenes. This is worth some premium, such as for MicroStrategy: 5%; the premium may be higher for smaller and more aggressive treasury companies.
Regulatory Arbitrage: There is so much money out there eager to buy Bitcoin, but they are not allowed. I'm not very confident in this: not that many individuals or institutions are interested in Bitcoin, and even if they are interested, this premium from taxes, mandates, 401(k) plans, or regulatory obstacles will decay over time and adoption. The same financial incentives and gravitational forces that provide value to Bitcoin treasury companies will also weaken the regulatory obstacles that initially gave them value. Premium: 20%. For some companies, such as Japan's Metaplanet, Bitcoin investors face high capital gains taxes, and this arbitrage premium may be higher.
Other Factors: I may have missed some other reasons why these companies still retain some actual business, explaining why a bag of Bitcoin should be worth more than the Bitcoin in the bag, so let's add another 20%.
Sum: 10+5+20+20=55...coincidentally, this is roughly where MSTR was trading when I first roughly calculated these premiums. With Bitcoin priced at $122,500, MicroStrategy's 628,791 Bitcoins on its balance sheet are worth approximately $77 billion, but the company has a market capitalization of $110 billion (a premium of approximately 45%).
MicroStrategy is a bank: An economic vision
It is not the kind of bank that accepts Bitcoin deposits and issues Bitcoin mortgages, but another deeper economic entity.
You can think of banking as a risk-sharing mechanism for society. Society provides loans to some high-risk projects, and the capital market banking system is part of how it distributes the risks associated with these projects. Basically, the financial version of 'who gets what and why'.
From an economics perspective, a bank is an institution that takes risks, with non-public information about the relevant entity; it allocates a small, guaranteed return to the lender, while profiting from any successful project, although not as much as equity owners. If the bank succeeds in doing this, i.e., on average chooses successful projects and earns higher interest from creditworthy loans than it pays to depositors, it creates profits for itself.
This is what MicroStrategy is doing, exploiting the undiscovered territory between the Bitcoin world and the fiat world.
Traditional financial institutions, pension funds, or retirees are the bank-financed portion of this structure. They 'deposit' money into MicroStrategy, with returns and terms determined by the specific tier they choose (STRK, STRD, STRF, STRC, or the residual claim on common stock, MSTR).
Banks invest these funds in assets: MicroStrategy is in the middle, guaranteeing payments to these economic entities by projecting that the asset will outperform the established interest rate on 'bank deposits.' Unlike banks issuing mortgages, credit card loans, and small business loans, MicroStrategy's 'loan' is to only one object: the world's best-performing asset. MicroStrategy is making a (very smart) bet: that the dollar value of Bitcoin will grow faster than the 8-10% interest it must pay to traditional fiat institutions.
Any middle school student with a calculator can figure out that if you borrow money at 10% per year to hold an asset that appreciates 40% per year, unlimited wealth is within reach.
Of course, Bitcoin will not steadily increase by 40% per year. If that were the case, in Michael Saylor's own words, Warren Buffett would have taken all the Bitcoin long ago:
'If Bitcoin had no volatility, those richer and more powerful than you would outbid you and take it away; you simply wouldn't get it... When it becomes completely predictable, Warren Buffett will say, 'Oh yes; we understand; we just bought all the Bitcoin'... and your opportunity is gone.'
MicroStrategy just needs to ensure that financing doesn't bankrupt it; the issued debt is completely within its control and discretion; dividend payments are conservative enough compared to its net capital (i.e., Bitcoin); and most importantly, the debt doesn't force the company to sell Bitcoin at an unfavorable time.
Basically, Saylor has created a tool that is well suited to survive extreme downturns. Even if Bitcoin falls 80%, which is the worst-case scenario, it is questionable whether this will still happen given the size and publicity of Bitcoin, and even if it does, it won't put the company in trouble. The key to a successful Ponzi scheme is that money must continue to flow in. More precisely, MicroStrategy's financing method is conservative Ponzi-style (unlike classic fraudulent Ponzi schemes, Saylor is not fraudulent; the visuals just overlap, and no one is being deceived...at least not involuntarily).
Neither traditional financial journalists nor Bitcoin enthusiasts skeptical of Bitcoin treasury companies have adequately described how these schemes collapse. Economist Josh Hendrickson accurately pointed out the relevant obstacles in 'Economic Forces':
'If the market is segmented and people expect the price to continue to rise rapidly, then the present value of future liquidation may exceed the current liquidation value. If a stock is trading at its current liquidation value, it is undervalued.' He also said:
'What MicroStrategy has done is turn itself into a Bitcoin bank by issuing dollar-denominated debt and buying Bitcoin. The company is explicitly engaged in financial engineering to exploit regulatory arbitrage.'
MicroStrategy's model (especially for other imitators, considering their respective jurisdictional barriers) could collapse if:
Investors are wrong about the future direction of Bitcoin; the mandates, tax rules, and legal obstacles currently preventing investors from directly buying Bitcoin are relaxed; the 'flywheel effect' referred to by Bitcoin world Twitter users exploits the ability of regulatory arbitrage, relying on 'investors maintaining the expectation that Bitcoin's future value will increase significantly'.
If dividends are not paid, preferred shareholders and buyers will be unhappy. If MSTR shareholders are diluted just to satisfy bondholders, they will be unhappy. But so what? This won't destroy MicroStrategy.
What would really destroy this model is the disappearance of these barriers to traditional financial institutions holding Bitcoin. It is these regulatory barriers that drive the growth of so many companies; allowing them to be a financial bridge between the old and new worlds; allowing them to absorb inefficient, low-yielding capital from around the world and inject it into Bitcoin.
If fund managers, treasuries, or family offices start hoarding Bitcoin directly instead of buying MicroStrategy's products, the main raison d'être for Bitcoin treasury companies disappears.
In short, the existence of Bitcoin treasury companies depends on the inertia of the current system. It crucially depends on whether family funds, pension funds, sovereign wealth funds, and traditional investors are willing to go to the trouble of figuring out actual Bitcoin exposure (plus some safe, conservative leverage). If they don't, and instead prefer to pay a 50% premium, then yes, the business model of Bitcoin treasury companies will be sustainable forever.
What else could go wrong?
MicroStrategy does have custodial risk, with its Bitcoin dispersed among multiple custodians, and the solution intentionally kept opaque. What happens to MicroStrategy if Coinbase goes bankrupt? Or worse, what if new political winds bring radical tax policies? These are tail risks, but still risks.
If Bitcoin fails, MicroStrategy will obviously fail with it. If Bitcoin remains a stablecoin at $118,000 forever, MicroStrategy's opportunistic use of abundant financial capital is almost meaningless, and it will just be a pile of Bitcoin, as most journalists and analysts think, with its extraordinary growth (mostly) gone.
I think this is exactly where many journalists and analysts get confused when looking at this treasury company phenomenon: if you don't see why Bitcoin has value or utility, let alone a place in the future of money and finance, then a company dedicated to acquiring as much Bitcoin as possible is obviously meaningless.
If you do see Bitcoin's utility and future, and its price is constantly growing relative to depreciating fiat currency, then a company that acquires more Bitcoin by tapping into capital market money flows is a completely different story.
Hedging vs. FOMO: What if I'm wrong?
Rational humility makes us realize that perhaps, just perhaps, we're wrong about something.
'Diamond hands' are constantly being forged... and my hands are still quite fragile. I usually feel very uneasy when the price of Bitcoin falls sharply. (I think these sudden extremes are a big problem, and even in hindsight, I have a hard time explaining them.) I will act recklessly and impulsively invest rent money or other spare cash that I shouldn't be putting into Bitcoin.
This behavior usually favors me in a bull market, but one day it will backfire. The more I learn about MicroStrategy, the more I like many of its specifically designed products. For me, holding something like STRC (for short-term cash) and STRK (for mild Bitcoin exposure and cash flow) makes some sense. Financially, STRK is like holding Bitcoin twice removed; short-term price fluctuations will be much milder, and it will provide me with some additional fiat income.
Given that my net worth and professional activities are mostly related to Bitcoin and Bitcoin prices, it makes sense to concentrate a smaller portion of my net worth in this single area.
Why not just put the cash in a high-yield savings account?
Two reasons: their returns are not high, with an interest rate of 4.05% according to my 'high-yield' dollar account. Saylor's equivalent product STRC has a target interest rate a few hundred basis points higher than this; while STRK (which approximates Bitcoin itself in the medium to long term, discounted or amplified according to MicroStrategy's mNAV) currently has a yield of more than 7%. Second, I know myself, and I would probably invest the cash in my bank account into Bitcoin during a significant price drop; holding STRC or STRK in a brokerage account would at least create some obstacles to this irrational behavior.
The Ubiquitous Hedge
Since I am already structurally shorting fiat currency, holding debt and Bitcoin according to the initial 'speculative attack,' I am leveraged long, so it makes sense to diversify a bit!
I regularly maximize my pension contributions, which are mandated by the local mafia (government). These funds are invested in stocks and bonds (in a roughly 75:25 ratio); their performance is certainly terrible compared to any Bitcoin comparison, but in case I somehow, for some unimaginable reason, get the whole money printing, end-of-central-banking era thing wrong, at least I won't starve in my old age.
Second, there are huge tax advantages to paying into pensions: maximizing contributions gives me about 1.5x the funds immediately. While Bitcoin's regular 40% CAGR would outpace these extra funds in less than two years, they also come with a tax-free mortgage benefit; if one day I want to buy a house in the real-world 'shitcoin,' I can use this money.
The opportunity cost of Bitcoin is real and can become quite serious over time, but this is not a matter of faith. Real-world practicality dominates: whether hyperbitcoinization happens in a week or a hundred years will make a world of difference to your lifestyle.
What does all this have to do with Bitcoin treasury companies?
Because the 'what if I'm wrong' hedge applies here as well.
Despite all the fancy jargon, new metrics, and futuristic moonshot dreams, I still can't understand why one Bitcoin should be worth more when packaged in a corporate structure than Bitcoin itself. Yes, net present value of future growth, yields, capital arbitrage, speculative attacks, and bets on hyperbitcoinization banking, but... really?
Okay, what if I'm wrong? Many people in the Bitcoin space I trust are endorsing these things, it feels like more are joining every minute, and they do have some logic. Cheap leverage, speculative attacks, exploiting (or 'tricking') fiat money pools into Bitcoin.
So I recently FOMOed into two Bitcoin treasury companies: two of MicroStrategy's products (MSTR and STRK) and the emerging Swedish microcap H100.
It feels good to hold stocks again
Ten years ago or earlier, I used to hold a large number of stocks: a large, diversified portfolio. Over the years, for obvious reasons, I haven't held any stocks.
I chose MicroStrategy's products because they are the least financially insane in this area; I chose the second company because I can easily access it through my Nordic bank account, and I didn't want to bother finding a convenient broker, signing documents, and transferring funds just to potentially play with a few hundred dollars in Bitcoin treasury funds. There's already too much absurd paperwork in this world.
In the event that these things really have any value, MicroStrategy will be the protagonist: as their marketing says, MSTR is 'Bitcoin Amplified'. Since most of my savings are in tokens and my career is deeply rooted in Bitcoin, this diversification makes sense. (Also, MSTR's mNAV is rapidly approaching 1...it's 1.42 as I write this.)
Emil Sandstedt's words echoed in my ears, and I realized that I was the Bitcoin yield they were chasing, but with 25% Bitcoin yield and 20% (safe) leverage in preferred and convertible bonds, my exposure should be back in balance by about this time next year: my MSTR shares, worth about $150, currently provide about $120 in Bitcoin exposure; I am happy to pay an extra $30 to participate in the financial empire that Mr. Saylor is building.
The second is H100. For a small, agile company dominating a specific jurisdiction, its mNAV of 2.73 is also acceptable.
After buying, my first takeaway was: I forgot how fun this is!
Suddenly, I was tracking several different asset prices, not just one. Suddenly, I had a financial connection with companies that were actually doing things, not just the most portable, globalized, and easily accessible currency. Psychologically, I felt like I had become part of some cause, namely, participating in this speculative attack and Bitcoin yield curve construction project, namely, treasury companies. How exciting!
Second lesson: Bitcoin has changed the meaning of ownership.
None of these tools are mine; they are wrapped in layers of permissioned custody. I can push a button to sell them between nine and five on a weekday, but I can only see any value if:
Brokers cooperate; Banks receiving payments cooperate; Government does not block transactions.
This is worse than Knut Svanholm elegantly pointed out in (Bitcoin: The Opposite of the Clown World):
'A bank is like a 2-of-3 multisig wallet, with you, the bank, and the government each holding a key. In other words, the money in the bank is not really yours. It's not even real money at all.'
Or, holding stocks isn't so nice
I quickly reminded myself how opaque, absurd, and bureaucratic stock 'ownership' is. Last month, when I transferred funds into a brokerage account, found STRK, and clicked 'buy,' I received an error message: 'This security is not available to you.'
It turned out I wasn't eligible to buy U.S. securities through that broker.
Traditional financial assets are so opaque and require permission. These reminders of outdated value technologies come one after another. Apparently my 'investment' dropped 11% in a day or two, reminding me that I still know nothing about fair valuation or market timing. (However, Bitcoin also fell 5% from its two-week stable pattern of $118,000 at the time, so the opportunity cost was mitigated.)
Things got worse as I delved into the underlying quagmire of Bitcoin treasury companies: two Swedish low-priced stocks (H100 and K33; I had to use the money I originally intended to buy STRK to buy them) immediately fell by 10% and 20% respectively after I bought them.
Stocks are custodied and intangible; they exist in brokers' databases, and in turn, in company ledgers somewhere. They aren't physical... or even really mine; I can't spend them, transfer them, back them up, or restore them to different wallets. They are stuck in place, 'dead stock' in Adam Smith's famous phrase about money.
So I set aside some other fiat funds in a regular banking app and impulsively bought MARA (MSTR was available there, but none of the other MicroStrategy tools); while MARA issues shares and convertible bonds like another treasury company to hoard Bitcoin, at least it has an underlying operating business (mining), and its mNAV is about 1, so I wasn't paying a premium for their financial market, capital cost arbitrage game.
How exactly will Bitcoin treasury companies fail?
'It's very possible that we're going to experience an Internet bubble-like boom and bust cycle in the public equity markets.'
-- Danny Knowles, May 28, 'What Bitcoin Did'
MicroStrategy is bulletproof.
As Lyn Alden pointed out during MicroStrategy's Q2 earnings call, MicroStrategy would be fine even if Bitcoin fell by 80%. The company was in a much worse position during the 2022 bear market, when its Bitcoin was directly linked to margin loans and bank debt as collateral. This is not the case in 2025, with preferred stock dominating.
Setting aside the occasional obsession of traditional financial analysts or journalists with mNAV, or why a company should be worth more than the Bitcoin it holds, and the shock inside and outside the Bitcoin community about using debt to buy Bitcoin, MicroStrategy's financing is incredibly conservative. The company holds Bitcoin worth approximately $77 billion; the convertible bonds are worth approximately $5 billion (actually $8 billion, but some of it is already deeply in the money, trading more like equity than debt). The total amount of STRK, STRD, STRF, and STRC preferred stock is slightly more than $6 billion. (This puts the company's leverage at around 15%, meaning Bitcoin has to fall by more than 85% before the company faces any solvency issues.)
Another way things could go wrong is the depletion of traditional financial money market capital. MicroStrategy's ability to outperform Bitcoin by having lower/safer capital costs (or better debt terms) or by exploiting an mNAV above 1 (immediate value accretion because it allows Saylor to buy Bitcoin at a discount) depends on these conditions. If these conditions disappear, such as no one buying treasury company issuances, financial capital flowing elsewhere; money printing stopping; interest rates on government securities skyrocketing, etc., I don't see how MicroStrategy's mNAV wouldn't fall directly back to 1.
Finally, MicroStrategy has custodial risk. As the largest player, holding about 3% of the total supply, the honeypot risk is everywhere. (This may not be a problem for smaller companies distributed across very different jurisdictions.) MicroStrategy keeps its large Bitcoin holdings in Coinbase custody, with the solution intentionally kept opaque.
What happens to MicroStrategy if Coinbase goes bankrupt? Or worse, what if new political winds bring confiscation or radical tax policies? These are good questions, but also very remote tail risks. Do we really need to worry about them that much?
Whether Bitcoin treasury companies are meant to bring Bitcoin to the heart of global capital markets, or whether it all ends in disaster, remains to be seen.
Closing: Selling my soul? Ponzi scheme brainrot?
Choose your Bitcoin treasury company carefully: H100 and Sander Andersen seem very focused on accumulating Bitcoin, and the company is quickly climbing the Bitcoin treasury rankings. Financial markets are currently rewarding these companies' efforts. In contrast, the K33 team is acting much slower, and their stock price has experienced a classic short-term rise followed by a gradual return to its starting point since their initial Bitcoin launch months ago. MARA and MicroStrategy prices are hovering around levels from several months ago.
I may soon tire of this latest wave of fiat financial engineering. There's limited fun to be had holding these permissioned, brokerage-dependent traditional assets.
Store Bitcoin in cold storage instead of fiddling with these Bitcoin securities.
Treasury mania is spreading among Wall Street and excited Bitcoin enthusiasts. Perhaps the financialization of Bitcoin has arrived, but honestly, I think I'll mostly sit on the sidelines.
