🗡️ TradFi’s driving crypto

Historically, a rising ETH leads to altseasons. So let’s hope it keeps going up.

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Explainer

Bitcoin Strategy Companies 101

Everyone’s wondering what’s causing the Bitcoin pump. It’s simply supply and demand, and there’s a new type of company on the block.

TradFi market is supposed to be very rational and boring.

But if you look at the BTC Treasury Strategy, it looks very similar to DeFi degeneracy. Kinda like 2021 OHM (3,3) mechanics. Let’s look into them in more detail.

What are they? Basically, they’re companies that hold BTC as a store of value.

They don’t buy BTC with profits alone. They often raise capital through debt, equity, or convertible instruments. There are more creative strategies like NAV arbitrage, but that’s for another time.

Many investors are skeptical of these companies due to one thing: Net Asset Value (NAV) Premium. It’s the premium (or discount) of the market capitalization of the company to the value of its underlying BTC holdings.

Bitcoin Treasury Companies trade at, on aggregate, a 73% premium to the value of their underlying BTC holdings. Why’s there a premium?

#1. Regulatory premium. Many institutional funds now view BTC as a Store of Value. They only have 3 compliant options for exposure.

• BTC mining equities. But they often sell their BTC to cover their costs. So it’s a no-go.
• Spot BTC ETFs are better. But many institutional mandates still prohibit direct crypto exposure, even via regulated funds.
• So, BTC Treasury Companies are the cleanest, compliant workaround.

This isn’t some new crypto-specific thing. During periods when gold ETFs were unavailable and investors turned to gold miners as a proxy.

#2. Potential BTC per share.

The goal of treasury companies is to increase the BTC per share. When investors are paying a premium, they’re also including the value of future BTC that’ll be acquired by the company.

NAV Arbitrage is a technique used by Strategy to increase BTC per share. When the stock trades at a premium, Strategy raises funds by issuing it at the premium and uses it to buy BTC. Since the shares are issued above NAV, each new dollar raised adds more BTC per share to the existing base.

Largely using this strategy, Strategy has 11x its BTC per share since August 2020. If you wanted to justify the current Strategy premium, this ability to increase BTC/Share justifies it.

Obviously, there’s some speculation going on as well. Even TradFi has its degens.

But premium is not pure speculation. It represents investors’ confidence in the company’s ability to efficiently raise capital and increase the BTC per share.

Strategy is the king of this “treasury strategy”. 70% of BTC in Public Company Treasuries are held by Strategy.

But there’s a wide variety of strategy companies. Collectively, they’ve accumulated around 725k BTC, which is 3.64% of the entire BTC supply. There are 78 companies with >$10M in BTC on their balance sheets. You can see more stats here.

It’s difficult to quantitatively study the price impact of these purchases on BTC prices. According to Keyrock, most small Treasury purchases only contributed to 0.59% of daily price impact on average.

But some of the big Strategy purchases do impact the market heavily. Just before EOY 24’, they’d contributed to ~9.05%to price impact.

Strategy had purchased another 4,225 BTC for ~$472.5 million at an average price of $111,827 per BTC between July 7 and July 13. Those purchases would’ve contributed a lot to the recent $BTC rally from $108k on July 7th to a new all-time-high of $122k.

So these companies are obviously good for our bags.

But many people are worried risks associated with this strategy. The main one would be around the terms of their capital raise. Fortunately for us, Strategy’s has very safe deals.

🚀 DeFi Catalysts

Base has been teasing a very big announcement for tomorrow. It’ll probably be some new application. Keep an eye out for it.

Fantasy.top is migrating to Base. All your assets (Cards, ETH, WETH, USDC) and login method will be carried over to Base.

JokeRace introduced Joke Games. There’ll be three teams that’ll compete for over $15k. They’ll compete in three contests a week from July 21st to Aug 22nd.

Upshift has chosen Euler Finance to launch their isolated, ungoverned lending market for hgETH. It’ll have incentives and points as well.

Caldera, a rollup-as-a-service infrastructure provider, is launching its native token: $ERA. It’ll be used for gas fees, staking, and governance.

Maple Finance will be launching on the Converge Chain. They’ll launch permissioned lending pools, bring credit to tokenized RWAs, and more.

Aevo officially launched Aevo Degen PWA. It allows users to trade with up to 1000x leverage on mobile in an app-like experience.

Meteora has added support to xStocks from Backed.fi. It can add more liquidity and utility for those tokenized stocks.

Aligned introduced their suite of products. They’ll offer several services ranging from a zk-verification layer to wallet-as-a-service.

Reya is becoming a based rollup that’ll focus on trading. They’re aiming to be the home of “Internet Capital Markets”.

Polygon shipped its Heimdall mainnet. It enables ~5-second fast finality. Previously, it used to take around 1-2 minutes.

Revert Lend went live on Base. It allows users to borrow against their Uniswap V3 LP positions.

Sky Ecosystem has partnered with Alchemy Pay. It’ll allow users across 173 countries to buy $USDS and $SKY using fiat.

📰 Industry News

Hyperliquid Strategies is a new company to execute a $HYPE treasury strategy. $888M will be used to acquire HYPE.

Robert Leshner, founder of Compound Finance and Superstate, bought controlling shares of a micro stock. Existing management tried to dilute him out by issuing new shares. The story is evolving.

🐦‍⬛ X Hits

1. DeFi strategy on Katana.
2. Is BTC getting ready for a monster run?
3. Easy money opportunities on prediction markets.
4. ​Aave vs Morpho: a data-driven comparison.
5. Explanation of reserve assets.

😂 Meme

Until next time,

Edgy

Today’s email was written by Edgy and Yayya.

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DISCLAIMER: I’m NOT a financial advisor. This content is for education and information purposes only. Crypto and DeFi are risky and speculative. Please do your research before investing.

Whenever you’re ready, here’s how we can help you:

• 🚀 The DeFi Edge Ventures – We identify, invest, and help amplify DeFi Protocols that positively impact the Crypto space.
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