IN TODAY'S ISSUE:
- The launch of bitcoin native company, Twenty One, punctuates the success of bitcoin treasury reserve companies.
- Investors have devised inventive new metrics to value these companies, but they vary widely across firms.
- Bitcoin treasury companies have billions in dry powder with which to issue stock and purchase bitcoin, potentially impacting prices significantly.
Bitcoin Treasury Companies Have Substantial Dry Powder to Push Bitcoin Higher
Last week, the launch of Twenty One sparked major interest across the industry. This newly formed, bitcoin-native company, backed by Tether, Bitfinex, and SoftBank and led by Strike CEO Jack Mallers, is going public through a merger with the Cantor Equity Partners SPAC. Its core mission mirrors a growing trend in the capital markets: to increase the company’s bitcoin holdings on a per-share basis.
This approach is the evolutionary next step in the path blazed by Strategy (fka Microstrategy). Since adopting its bitcoin accumulation strategy, Strategy has become the third-best-performing stock in the Russell 3000, delivering a staggering total return of 2,974.8% since August of 2020. It’s no surprise that other companies have noticed and copied Strategy’s playbook in part or in whole, reporting similar metrics like “bitcoin per share” and “bitcoin yield.” Today, 69 public companies own 720,898 bitcoins worth about $69.6B. Excluding Strategy, the number is roughly $16.1B.
What sets Twenty One apart, however, is its singular focus. Unlike other public companies that have adopted bitcoin as a “primary treasury reserve asset,” such as Strategy or Metaplanet in Japan, Twenty One isn’t an operating company repurposing its business model. It’s a pure-play bitcoin accumulation vehicle, built from the ground up in capital markets, seeded with bitcoin, and aiming to create bitcoin-native financial products in the future. Twenty One also has the advantage of the backing of the largest and best-connected players in crypto, Tether, Bitfinex (same parent). and Cantor, along with Mallers’ public presence and visibility.
Twenty One Far Outpaces Returns from Other BTC Treasury Companies
Investors have taken notice of Twenty One's announcement, propelling shares of the SPAC vehicle, Cantor Equity Partners (CEP), sharply higher. As of Thursday’s close, CEP has outperformed the S&P 500 by a whopping 347.0% on a relative basis. While the enthusiasm is understandable, especially given Twenty One’s positioning as a purpose-built bitcoin accumulation vehicle with high-profile backers, the magnitude of the rally significantly exceeds what we’ve seen following similar announcements by other companies pursuing a bitcoin treasury reserve strategy at comparable stages.
The likely driver behind this outsized reaction is the structural advantage Twenty One enjoys: it was seeded with a large initial bitcoin position and has significant capacity to issue additional debt and equity. This gives the company a uniquely long runway to scale its bitcoin holdings, which appears to be fueling investor optimism.
Quantifying the Benefits of Bitcoin Treasuries
A growing debate within the investment community centers on how to properly value bitcoin treasury companies. Many currently trade at substantial premiums to the fair market value of their net assets (including bitcoin holdings) and any underlying operating business, leading analysts to propose new and unconventional valuation methods. The most prevalent has been the ratio of a company’s market capitalization to the value of the bitcoins it holds. As shown in the table below, this metric varies widely, ranging from 4.9x for Twenty One to 1.2x for Semler Scientific, highlighting the lack of consensus across the sector.
Bitcoin Treasury Companies Could Create Significant Buying Pressure
The preceding table underscores a key takeaway: companies that have adopted bitcoin treasury strategies have, in many cases, created substantial value. One way to observe this is through their enterprise values—calculated as market capitalization minus cash and the fair market value of bitcoin holdings, plus non-convertible debt. It’s important to note that the maximum potential dilution from convertible debt is already factored into the "Assumed Shares," so it isn’t double-counted as debt.
Aside from Twenty One, these companies also have legacy operating businesses. While not a perfect comparison, the gap between current enterprise value and enterprise value just before the bitcoin treasury announcements offers a rough proxy for how the market has priced in the adoption of bitcoin treasuries, assuming legacy operating businesses have not changed in value. Perhaps the most striking observation is how little credit the market appears to have given Semler Scientific for its transition, suggesting a potential disconnect or lag in recognition.
Another lens for evaluating this dynamic is to look at the cumulative increase in equity value since these companies adopted bitcoin as a treasury reserve asset. This provides a rough estimate of the total capital they could theoretically raise by issuing shares at current prices (ATMs or at-the-money stock offerings) to purchase additional bitcoin. In theory, this arbitrage opportunity should persist until the premium to net asset value is fully arbitraged away.
If we apply a 10x "money multiplier"—a rule of thumb reflecting the historical impact of new capital on bitcoin’s market cap—and divide by the total supply of bitcoin, we arrive at a rough estimate of the potential price impact: a nearly $42,000 increase per Bitcoin. The implication is clear: this "dry powder" in the form of issuance capacity could have a significant upward effect on bitcoin’s price.
Market Update
Bitcoin climbed 3.2% this week, participating in a broader relief rally across asset classes. Equities saw strong gains, with the S&P 500 up 2.2% and the Nasdaq Composite up 3.2%. Gold, meanwhile, continues its pullback after its recent surge, down 3.3% on the week, but is still up 22.0% year-to-date. Oil declined 5.7% amid renewed concerns about slowing economic growth and signs of expanding supply.
Market conditions appear to be stabilizing, with volatility receding in some areas. Equity market volatility (VIX) is down 57.1% from its peak, and interest rate volatility (MOVE) has fallen 23.6%. However, foreign exchange volatility (CVIX) remains elevated, only 10.1% below its highs. The U.S. Dollar Index (DXY) continues to hover near local lows, while the Swiss Franc remains strong, trading near its recent high against the dollar.
Current conditions in the bitcoin markets continue to support the view that the recent move higher may have legs. Perpetual swaps funding rates remain negative, suggesting that traders are still positioned bearishly—a potential contrarian indicator. Meanwhile, CME futures are trading at a reasonable basis, with annualized premiums in the mid- to high-single digits, indicating balanced demand. Spot bitcoin ETFs have also seen strong inflows, with $4.2 billion added since mid-April. Notably, BlackRock’s IBIT alone attracted a massive $971 million in inflows on Monday.
Important News This Week
Investing:
Pompliano Seeks $200M in SPAC IPO to Take Crypto Influence Public - Decrypt
Regulation and Politics:
Howard Lutnick - America's Bitcoin Strategy & Trump's First 100 Days - Bitcoin Magazine via YouTube
Trump's Crypto Sherpa Bo Hines Says Crypto Legislation on Target for Quick Completion - CoinDesk
Companies:
Morgan Stanley Plans to Offer Crypto Trading to E*Trade Clients - Bloomberg
Tether's U.S.-Based Stablecoin May Launch Later This Year, Early Next Year - CoinDesk
World Liberty’s USD1 Will Integrate with Tron; WLFI's Witkoff Teases More Partnerships - CoinDesk
Metaplanet Plans to Establish US Subsidiary, Raise $250 Million To Accelerate Bitcoin Treasury Strategy - The Block
FixTheFilters: Bitcoin Arguments Go Viral Over Relaxing Core Data Storage - Protos
Stripe Tests New Stablecoin Project as $3.7T Market Looms - CoinDesk
Nexo Re-Enters the U.S. Market - Nexo
Upcoming Events
May 7 - FOMC interest rate decision
May 13 - April CPI data
May 27 - Bitcoin 2025 conference
Jul 2 - Final SEC deadline for decision on GDLC ETF conversion
Jul 8 - 90-day tariff suspension ends
Jul 22 - EO Working Group report deadline
