The Crypto Treasury Playbook With Ben Forman & Josh Solesbury From ParaFi Capital

What's actually interesting here is like the barriers to entry to copy MicroStrategy, at least at a small scale. Like you need a shell legal entity, um, and I guess like a half, half decent management team. A lot of these management teams aren't very good, but, but you know, it's actually like from a game theory standpoint, like if you're a failing public company, this is actually probably like the most EV positive, you know, one of the EV positive things you, you can do in terms of pursuing this.

This episode is brought to you by SKALE, the next evolution in Layer 1 blockchains. Explore the gas-free ecosystem at scale.space/ecosystem and follow their journey on X @skale_network. Thanks to SKALE for making today's episode possible. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only, and the views expressed by anyone on the show are solely their opinions. Not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed. All right, everyone, welcome back to Empire. We are doing, uh, take 2 of a crypto treasury vehicles episode, uh, the episode with Josh, uh, we've got Josh from ParaFi, we've got Ben Foreman, who's the founder of ParaFi, uh, back on the show. So Ben, Josh, welcome.

Thanks, Jason Yanowitz. Excited to dig in.

Yeah. Josh, your episode from— when was it, 45 or 60 days ago— is one of the most listened to episodes of the year. So we— it seems like crypto— I don't even know the term— like crypto treasury vehicles or public token vehicles is hot. But Ben, what do we call these things these days?

I've heard someone call them DATs, DAT, so digital asset treasuries. But just called DATS, which we'll see, we'll see if that sticks. But like crypto treasuries, digital asset treasuries, um, there are a few other flavors of, of what they're called.

Uh, yeah.

Um, well, anyways, I wanted to do— I mean, there's been so much that's happened since that episode, uh, so I just wanted to have you guys back on and discuss. I'm going to read maybe from your guys' investor letter, Ben, that you send out to LPs, uh, and we can, we can maybe play off of that. So for, for those who don't know, and for those who missed the episode with Josh, ParaFi has been one of the most active firms in the crypto treasury space. I think you guys had your January investment in Sol Strategies, which is a Canadian public vehicle focused on Solana. But Ben, kind of quoting you from your LP letter, it said, you said, we believe crypto treasury plays are a deeply misunderstood intersection between traditional capital markets and digital asset markets. While many have dismissed this wave of companies an ephemeral trend, we take a fundamentally different view. So maybe with that as the setup, can you just give your, you know, high-level, like, your 20,000-foot view on, like, what is happening in this, in this space right now and why you're so excited?

So I think there's a fundamental question that is kind of like the first principles question that I think should be addressed head-on on this topic, which is why should $1 of Bitcoin held by a public company be worth more than $1? Um, because that's the dynamic that has existed and persisted with MicroStrategy, uh, for now coming up on the past about 2 and a half years. It's traded at a pretty healthy premium to NAV. Um, and so the big question is why. And actually, you know, when I first encountered MicroStrategy back when they were starting to do their convertible bond issuance. The first convertible bond issuance, I believe, was like in 2018, 2019. They started to buy Bitcoin, um, with debt, um, and with cash on the balance sheet, and then did the first convert issuance in, I think, '19 or '20. You know, I scratched my head a bit because like it was difficult. I couldn't wrap my head around why an investor would pay a premium for a public company that, uh, held Bitcoin as opposed to just buying Bitcoin spot markets. And then certainly when we had the ETFs approved in January 24th, in 2024, like there, it felt like there was even less of a reason because you can just buy iBit and pay NAV. Why would you pay a premium to NAV? Um, but as we've kind of dug into these digital asset treasury plays or crypto treasury plays or whatever you want to, you know, refer to them as, um, I think there's, there's more of an explanation as to why, uh, these premiums may exist. And certainly if you're a long-term holder, why you may do better holding a digital asset treasury company than underlying spot. I think a big part of that is this concept of Bitcoin per share. So the, the, the MO of MicroStrategy is simple. They would like to increase the units of Bitcoin held per fully diluted share of common stock. That is the mission, goal, MO of this company. Um, what this means in practice is, um, if you, uh, hold— I'm making up numbers here— if there's like 1 unit of Bitcoin per share of common stock At the end of a year, if you can increase that to say 1.2 units of Bitcoin per share of common stock, you've— there you've increased your, uh, NAV per share by 20%. So the ability to grow NAV per share is a reason why these things over a long-term time horizon could outperform spot. And here's the essence of it, which is Um, in a very simplistic lens, when you trade at a premium to NAV, you can sell stock at a premium and use the proceeds to buy Bitcoin, increasing your units of Bitcoin per share of common stock. When your stock trades at a discount to NAV, you can do the inverse. You can sell Bitcoin and buy back your stock. So, so when you're above NAV, you sell your stock, you buy back Bitcoin. When you're below NAV, you sell Bitcoin, buy back stock. And both of those capital market maneuvers increase units of Bitcoin per share of common stock. And so, what you're effectively doing here is shareholders are the beneficiaries of effectively arbitraging their own stock, whether it trades at a premium to NAV or a discount to NAV. So this dynamic didn't exist with Grayscale because there was a principal-agent problem, and, you know, shareholders couldn't, couldn't redeem when it was trading below NAV. And Grayscale didn't want to offer redemptions because they wanted to collect management fees. So typical principal-agent problem. On these plays, there's no principal-agent problem because shareholders are fully aligned. Management wants to increase Bitcoin per share, shareholders want to increase Bitcoin per share. Then on Bitcoin ETFs, you also don't have this dynamic because the authorized participants are capturing that arbitrage. Unless these names trade very efficiently right around 1x MNAV, I think there is an opportunity to hold on to them through the cycle and the best management teams. There are a bunch of things that you have to do to execute on what I just said. It's not very simple, um, but you, um, I believe the best treasury plays will be able to outperform, uh, spot, um, crypto prices. And, and this isn't also to talk about capital markets access and converts and preferreds and all the other instruments, but at its core, you know, I think the, the reason why I think these names are misunderstood, just to like nail down the point, is that, um, if you can increase units of SOL, units of ETH, units of Bitcoin per share of common stock through capital markets actions, you have the ability to increase NAV per share and therefore outperform spot prices. Not every one of these companies will do it, but certainly, we believe some of the best-performing ones will be capable of doing it.

Can I try to repeat that back to you, but with the knowledge that I'm not as smart on the financial side as you guys, so this might sound foolish, but let me try to repeat that back to. So, what you're trying to answer is the main— whenever someone talks about public treasury vehicles, you're asking the question, why does $100 of BTC or ETH trade at a premium when it's held by a public company? That's the big question that people maybe who aren't familiar with these vehicles, that's the number one question everyone asks. Or why does MicroStrategy trade at— what does MicroStrategy trade at, 2x NAV or something? 1.7, 1.8, probably something like that, when BlackRock's spot ETF trades at NAV, right? So that's the question. And the answer, as you put it, lies in the ability to grow the number of Bitcoin or ETH held per share over time. And the way that they do that is by using a bunch of different instruments, right? Convertibles, preferred equity, at-the-money issue, at-the-market issuance, ATMs, debt facilities, things like that. And so if you're able to— let's say you have 1 Bitcoin per share, you then use all those different instruments to— by the end of the year, you're at 1.2 Bitcoin per share. You could say you just got a 20% BTC yield. And if when you have a positive BTC yield, your equity can then outperform the underlying token, is that Did I— is that correct?

Yes.

Okay. Why?

A bunch of footnotes and like, you know.

Yeah, yeah, yeah.

The essence of it, I think, is spot on.

The essence. You're like, yeah, don't, don't try these yourself. But, but yeah, your essence is correct. This episode is brought to you by SKALE, the next evolution in Layer 1 blockchains with a gas-free, invisible user experience, instant finality, and robust security. SKALE allows for limitless scalability and has already saved its 50 million users over $11 billion in gas fees. SKALE's high throughput, zero transaction costs, and powerful Web3 infrastructure make it the ideal platform for gaming, AI, and other high-throughput apps. To explore the gas-free ecosystem, visit scale.space/ecosystem and follow their journey on X @skale_network. That's SKALE spelled with a K. Thanks to Skale for making today's episode possible. Katana isn't another new general-purpose blockchain. It's purpose-built for DeFi users to provide the best experience possible. It does this by sustainably generating deeper liquidity and higher yield than any other network. If your assets are sitting idle, then they're dead. Katana is built from the ground up with DeFi mechanics to bring your bags back to life All you have to do is bridge over and Katana does the rest for you. Incubated by Polygon Labs and GSR, Katana launches with a notable ecosystem of primitives, assets, and partners like Morpho, Sushi, Vertex, Lombard, Chainlink, and Yearn. Be early to Katana. Join the pre-deposit campaign before mainnet opens at the end of this month. Deposit funds and open rewards filled with randomized amounts of KAT tokens. There's also a CryptoPunk and other exclusive NFTs hidden for the lucky ones. As always, investments in blockchain technology involve risk. Terms and conditions apply. Why is this the time that these are going crazy? Like, why? So if that's— sure, like, I just laid it out. Seems obvious. Like, why is, you know, Q2 and Q3 of 2025 the time when all of these are happening right now?

Yeah, I mean, Ben, you start and I'll follow you.

Oh yeah, you go, you go, you go.

Yeah, I mean, I think from a macro standpoint, uh, and from a regulatory standpoint, we're, we're in a very conducive environment. Uh, Ben actually termed this, uh, we call it reverse tokenization, this idea that crypto tokens will be finding their way into public capital markets more and more. Especially under the current administration, and as the, the institutional kind of shift and how they think about digital assets and how they treat them kind of combines with the progressive shifts on, on the regulatory side, right? You don't have SAB 121 anymore. You can now very clearly own digital assets. There's not corresponding liabilities. I think these two trends on both institutional acceptance where large debt groups like Capital Group feel comfortable owning an instrument that relates to Bitcoin volatility, um, joined with an administrative push to allow public vehicles and public individuals to be working with digital assets, has provided, um, this, this, uh, kind of lubricant to all this friction that used to exist, which kind of explains perhaps a bit of the Grayscale history back in the day. So now, at least in the United States, which of course is looked at by many other countries as a leading capital market, has this conducive environment where reverse tokenization can occur. And then you see capital markets like the UK or Australia or Japan kind of look towards this and then also be accepting of their own kind of reverse tokenization trends. So I think those two macro aspects are critical. And then I do believe that, you know, a shift a little bit in some of the capital markets towards higher yielding or more volatile instruments, because those pools of capital have just faced either very dormant sets of issuances, right? The, the, the sailor argument for pref is actually very interesting, where the typical vol of like the pref index was 5, and can he offer an instrument that is closer to the 50+ offered by Bitcoin? So I think there's also this argument to be made that in certain pools of capital, as well as certain capital markets, like capital markets abroad, there just hasn't been an offering that has the volatility profile of Bitcoin. And there is tremendous demand in some of these pools of capital to experiment with these. So I think those are kind of some points on my side. Ben, I'm sure you have something to add there.

Yeah, I, I, I would say that like the history of capital markets are like, is, are littered with copycats. Like when something's working, like people try to copy it and replicate the, the success. And the, uh, you know, you saw, you've seen this in crypto with like DEXs and money markets and all like, you know, centralized exchanges in every category in crypto. Like when there's success, there are like 50 to 100 venture-backed companies that are all, you know, trying to build towards the same, um, same product. But what's actually interesting here is like the barriers to entry to copy MicroStrategy, at least at a small scale. Like, you need a shell legal entity, um, and I guess like a half, half-decent management team. A lot of these management teams aren't very good, but, but, you know, it's actually like from a game theory standpoint, like, if you're a failing public company Um, you know, this is actually probably like the most EV positive. Yeah, you know, one of the EV positive things you can do in terms of pursuing this. And so like a lot of the companies— I mean, I, I think, look, I think it's true. It's like, I think a lot of the companies that are doing this, like, it's not like, you know, Meta is pursuing a Bitcoin treasury strategy, but the companies that— or, you know, or Amazon, um But, uh, the companies that have less to lose are doing this because they have the shell entity. It's a very easy thing to do. They've seen MicroStrategy's success. And then, um, the other, the other thing I would add, maybe it's like a slightly more nuanced point, but, uh, there is a diseconomy of scale on these treasury plays in the sense that like MicroStrategy has gotten very big. They own 3%, almost 3% of all Bitcoin. And to increase Bitcoin yield per share at that scale, um, can become more challenging, um, because of just like the law of large, large numbers. And so there are some advantages to being small. Like, no, don't get me wrong. On the other hand, there are advantages to being large, because when you're large like they are, you can access convert markets and you can, you know, issue these kind of preferred equity.

They're the largest convertible issuer Globally, right?

Globally.

What, one of them, or they're the largest?

They're, they're the largest in the U— I think the total convert market in the US is $250 billion, and they're about $8 billion of that. So call it like 3% of the entire, uh, convert market. And I think US convert market is like—

and then I was looking at their options open interest. It's, I mean, it's like, it's like, it's like Facebook stock. It's like Google. It's like, it's crazy.

It's, it's crazy. And like, there's like a flywheel there, right?

Where, because then you get more efficient convert arbitrage. Can you walk through that actually a little bit? Can you explain that to me, Josh?

You want to— you want to—

yeah, no, I think, um, the TL;DR there is the, the more liquid your stocks, the more developed your option chain, the more volume on the options, then your capacity to issue converts to a lot of these players that are effectively conducting arbitrage is, is higher because then they can go they can have long exposure to, um, the convertible note instrument, where they're basically just at a very high level— like, what they're doing is they're valuing a bond component and then a call option. And because of the volatility profile offered by MicroStrategy stock, which you just pointed out, um, through like, you know, the options, uh, because that volatility profile is normally higher than like the priced-in vol, they can then go and then they can find a way to go net short on the equity and capture that difference in the priced vol versus the actual inherent vol in, in the equity. And so if you have a robust equity and option market, that means you have more capacity for them to conduct the other leg of their trade, which means that they can then go and buy more notes. Um, but I think the key point to underline, which you've seen folks like Saylor and Simon from Metaplanet talk about a lot, like you know, I think they said like velocity is vitality, like volatility is vitality. If you're able to have this volatility and this capacity, uh, and by velocity I believe they mean like volume of shares, then you're able to effectively have more capacity to, to issue convertible notes, uh, and other structures. Um, yeah, I don't know if you would add anything to that.

Yeah, like I, I think like if you're, if you're buying a convertible bond of MicroStrategy Um, uh, what you— what you're likely going to do if you want to like effectively, you know, sell the vol— sell the option component is you're going to go to the options chain and, uh, you're going to sell the corresponding call option at the strike and the maturity that, uh, of the convertible note. Or you may do a shorter one and then roll it. Um, and, um, there— so MicroStrategy ability to issue convertible bonds is somewhat predicated on people buying the call— buying call options, because you need people to buy the call options so the convert arb desks can then sell those call options to the buyers. So, um, you know, one of the, I think, potential risks to MicroStrategy's ability to continue to access the convert market is twofold. One is they need their common stock to remain volatile, and if you look at, um IV on MicroStrategy common stock has actually come down over time. I believe it used to be more volatile than spot Bitcoin. Now, I think it's actually slightly lower. Then the other component is issuer-level concentration. If you're a convert investor, you may only want to have so much exposure to a single issuer of converts. So, um, there's value in having other, other issuers kind of enter, enter kind of the market, even though the risk profile may not be different. It's just like, you know, uh, kind of an arbitrary portfolio level risk metric that any, any fund would look at. Um, and so, but, but I think like what's, what's really interesting, uh, just, and, and Saylor's like, Saylor's pitch is, is so interesting because he talks about this like on 5 podcasts a day or 5 conferences. He always finds a way to like articulate it like slightly differently than the time before. But the way I kind of like think about what he's doing fundamentally is he's securitizing Bitcoin and he's slicing and dicing the return profile to cater towards different types of buyers. And, um, you know, uh, if you are, um, if you are a retail investor And you can go long Bitcoin, but there's no way you could kind of access convert markets or access preferred markets or, uh, run an ATM. Like, you don't have that capital market Swiss Army knife in your pocket because you're a retail investor. So he's kind of created this new product which is like a securitized Bitcoin. And, um, I think that's kind of like the secret sauce behind what, what he's doing.

So, and I would just quickly add that at scale too, I think they did like $3 billion in, in pref issuance this year, and which I think that they're one of the largest preferred issuers. And also like another key point is he's sold, I think, $600 million— Strategy sold $600 million of additional pref, uh, securities, uh, through an ATM structure with the, uh, preferred. So he's not only doing— he had this presentation earlier this week where there's this neat chart of kind of the composition of ATM over time, and it's like, it's, it's fully orange for the first couple weeks in the chart because that was just common. And now you start to see, you know, there's like the different preferred instruments that are also being sold ATM. So to Ben's point, he's built these new financial instruments as he securitizes Bitcoin. And not only can he do primary issuance, but he can now also kind of, you know, pull the toggles on how he wants to do his ATM, because some of these preference instruments actually trade at a premium to par, and so you can kind of start hitting the ATM there while cooling off on the common. You know, there's a lot of thoughts I'm sure that go through his head as he decides which ones, but it's a lot more of a sophisticated capital markets function than where they were even kind of just 6 months ago.

This would be like STRF or something, which is like the 10% preferred. Yeah, yeah, I like that. You're the definite— the explanation of like he's tokenizing or securitizing all of Bitcoin into these different instruments. That's a good way to put it. Maybe zooming out from MicroStrategy for a sec, Josh, how many, um, can you talk about this, the scale of how many deals are happening right now? Like how many deals do you guys see? Uh, how big has this become? Like how much have you guys deployed? Like talk to me about the scale of this.

It's, uh, the scale has even just relative to when you and I were last in the podcast with Tyler Evans, the scale has grown exponentially. So I believe there are at least 150 different Bitcoin treasury companies around the world. That doesn't include, you know, ETH and SOL companies and the longer tail of assets. So by count, you've had an expansion of the universe, whereas a couple years ago it was just strategy, you know, a couple of the Bitcoin miners and Tesla that held Bitcoin. You now have all these new entities. This is now the marginal buyer profile of Bitcoin, which we can get into why that's really good for Bitcoin in some ways. And then you've had, I believe, around 250,000 Bitcoin that are owned by new public entities other than strategies. So they're also starting to add scale. But in just like June alone, I think there were 21 new companies. So the pace of new companies coming about, especially in other capital markets, has been increasing. I think at ParaFi, we've taken a serious look at at least 60 to 70 of these in some shape or form. We are active globally at the firm, so we've been working in capital markets in Europe, in Asia, in LATAM.

So you've looked at 60 or 70 of these. How many do you think you've done of the— let's call it 65. How many have you done of the 65?

Um, I mean, we, uh, in some shape or form have invested in and/or committed to at least 10. Wow.

This episode is brought to you by SKALE, the next evolution in Layer 1 blockchains. With a gas-free, invisible user experience, instant finality, and robust security, SKALE allows for limitless scalability and has already saved its 50 million users over $11 $1 billion in gas fees. SKALE's high throughput, zero transaction costs, and powerful Web3 infrastructure make it the ideal platform for gaming, AI, and other high-throughput apps. To explore the gas-free ecosystem, visit scale.space/ecosystem and follow their journey on X @skale_network. That's SKALE spelled with a K. Thanks to SKALE for making today's episode possible. Katana isn't another new general purpose blockchain. It's purpose built for DeFi users to provide the best experience possible. It does this by sustainably generating deeper liquidity and higher yield than any other network. If your assets are sitting idle, then they're dead. Katana is built from the ground up with DeFi mechanics to bring your bags back to life. All you have to do is bridge over and and Katana does the rest for you. Incubated by Polygon Labs and GSR, Katana launches with a notable ecosystem of primitives, assets, and partners like Morpho, Sushi, Vertex, Lombard, Chainlink, and Yearn. Be early to Katana. Join the pre-deposit campaign before mainnet opens at the end of this month. Deposit funds and open rewards filled with randomized amounts of KAT tokens. There's also a CryptoPunk and other exclusive NFTs hidden for the lucky ones. As always, investments in blockchain technology involve risk. Terms and conditions apply. The way I understand it, I've been following these decently closely. You— ParaFi is now the first call for people launching a treasury company or one of the first calls. What are the signs that you look for? I guess like the green lights for like, oh, this is a no-brainer, and then also the red flags?

Yeah, uh, I can start with a couple. Um, so normally, uh, you know, first off, we like to study the capital markets that, uh, the, the entity, uh, will be based in. So we spend a lot of time in the US, uh, but there are really compelling opportunities, we believe, in, uh, other capital markets that, yes, may be smaller in size but there could be certain constraints on why a lot of institutional capital has to remain directed to that home market. There's also home bias in certain retail behavior. And so we will go in and study, you know, what is the, the debt and equity capacity in this market? How, what's the percent penetration of retail? What kind of volume is, is being driven? Is there the ability to build financial instruments that are conducive to acquiring more Bitcoin per share? Do we have to come in and design a synthetic ATM, or does an ATM facility exist? Or how can a company effectively build up its Bitcoin treasury? So step 1 is market analysis. Step 2 is what are the players that we want to be working with? And a lot of that really comes down to something Ben alluded to earlier, which is quality of management. We want to work with folks that really understand not just the Bitcoin aspect of it, but also the financial aspect. And sometimes it'll be a one-two pair. Sometimes it's just one individual. Like, I think something that Michael Saylor is really good at is being able to speak to his Bitcoin and MicroStrategy retail fans and then also being able to hold a conversation with, you know, a convertible note investor. And so does the team have the capability to understand and communicate with those individuals and entities? And are they going to be folks that are in it for the long term? Because given the velocity of what's happening, there's a lot of opportunistic people out there. And our job is to really partner with kind of longer-term folks that want to build something a lot larger. And that when the kind of bow breaks and if if things go bad, they will have the knowledge and the people around them to be able to maintain at NAV or even above NAV and be able to manage that situation. So I think I'll start with those two, and Ben, I'll pass it to you for others.

Yeah, Ben, maybe I was going to— maybe a follow-up on that is like, is there a deal number? Maybe let's say the 15th BTC treasury company where a new entrant simply can't command a premium, premium above NAV?

Yeah, look, like, the, the most reductive way to look at this is just like supply and demand. And like, do you need the, you know, 51st or 101st like Bitcoin treasury company? Um, the reality is, is many of these are, are perfect, um, perfect substitutes, um, for, for one another. And, um, What I expect to see— so, so we, we kind of can walk through like the view on what is the long-term equilibrium for Bitcoin treasury companies and public markets. What does the space look like in 1 year, 3 years, 10 years? Because I think the answer could, could look— could be very different. But I think certainly in the short term, like, we're seeing saturation in terms of number of treasury companies, and part of the reason for that is there's not great price discovery on some of the new ones because a lot of the PIPE investors are not unlocked because you need to wait for SEC approval, and the floats on these names are, are very limited. So there's not great price discovery, um, not dissimilar from like a high FDV, low flow token. So, uh, but because the price is, is, you know, is optically high, like it's encouraging others to kind of continue to pursue the strategy. Um, but when I think the dust settles I do think many of these will trade at discounts to NAV. I think that when they, when they do trade at discounts to NAV, it will prompt and catalyze a wave of M&A. I also think that right now we're in this like pure Bitcoin accumulation phase in these companies, but I think we're going to move to a phase where, okay, you have the Bitcoin, maybe you're trading much closer to NAV, So it's difficult to increase Bitcoin per share unless you're issuing converts. But even then, there's fixed capacity. So then it's like, okay, what are you going to do with that Bitcoin? Can you earn a yield on it? Can you run a business model around the Bitcoin, centered around Bitcoin financial services, or borrow/lend? Can you generate cash flow from other real assets to drive Bitcoin yield per share? Actually, Metaplanet— the past couple days announced they were going to start like real-world cash-flowing businesses to increase their Bitcoin per share. So I think right now we're in this like accumulation phase. There will be this, this kind of like market excess, and then I think you'll see a normalization over time to like a more long-term equilibrium state. And I think, um, Josh mentioned it on, uh, the last time he was on the podcast, but I think this is like a pretty critical point, which is You know, we kind of like are constantly asking ourselves what's like the bear case, base case, and bull case for any investment. And like when we make these investments, we aim to structure them as heads you win, kind of tails you effectively break even relative to holding the underlying. So like what that means is if we're investing in an ETH treasury company, you know, in a down— in like a, you know, a realistic downside case, will track ETH price, uh, you know, um, but in a, in a positive scenario will realize some sort of premium to, to NAV. Um, and so from, from that lens, I think these, for PIPE investors, for convert investors, for the private investors, can be, can be very attractive. But I think the dynamic is very different if you're, you know, a retail investor just buying these things in the open market. Sure. I think the math, uh, changes quite a bit.

Um, say more about the math changes quite a bit, meaning it becomes much more risky if you're just a retail investor buying like S-Bet in the open market, or maybe I won't pick on one thing, but like, uh, buying one of these in the open market, you're saying it makes a little less sense if you're just a retail investor?

Absolutely. Like, if you're buying, um, these names in the open market, you have to be very cognitive around what the MNAV multiple that you—

and you have to be also cognitive of when the You said when that you use this word, when the dust settles. So to me, I read that as when a lot of the maybe the unlocks happen or when people get like, basically have the ability to sell, which my understanding is a lot of these things are kind of like Q1 '26. I don't really know. So maybe walk me through like what when the dust settles.

Yeah. So, so I think there's like two, two types of dust that can settle. Like one is like a lot of these deals are SPACs. Where, um, so like, you know, Nakamoto, uh, you know, Asset Entities, which was Vivek Ramaswamy's deal, um, uh, these, these are all SPACs and, um, they require SEC approval. So, um, uh, until there's SEC approval, the deal actually doesn't close. So PIPE investors like don't actually, uh, have, you know, possess their shares or can't sell their shares until until the, the actual— like, there is actually SEC approval. I think a lot of these deals are, you know, the mar— publicly these companies have guided towards like the back half of this year when they expect to receive that, that approval. So that, that's like one form of dust settling. The second form is like, just like when you have all these Bitcoin treasury companies, at some point the market will be oversaturated. They're all somewhat zero-sum. Like, they They're all pushing up the price of Bitcoin. I think they're all quite good for Bitcoin price, but they're all competing with each other in terms of trading at a premium to MNAV. I think when the market reaches an equilibrium state, we'll see which ones trade at premiums, which ones trade at discounts, how long those premiums can hold. But I think this will, this will fully cycle. And then, by the way, the last thing I really want to, um, underscore, because I do think it's, it's a, it's a critical market dynamic, is like, okay, so it— these deals all tend to be zero-sum between 4 groups of people. Um, uh, the sponsor, like the group that's like kind of like organizing and leading this, and the management, kind of the management team behind it, uh, the PIPE investors, existing shareholders, and then the fourth group are like the bankers and the lawyers who typically take like transaction fees or warrants. Um, you can't create value out of thin air, so like the pie is kind of divided among those four constituencies. And, um, uh, and then, you know, the, the other group I would say is like the, the, you know, public market investors that come and buy these names. And, um, Uh, but I do think there's a lot of, like, as we've, as Josh and I have looked at many of these deals, I do believe there's a lot of, like, mercenary short-term behavior, uh, you know, around the sponsors of many of these deals, where there's not true long-term alignment. And then on the PIPE investor side, there's also not long-term alignment. Um, like, this isn't like a 1-year cliff, 4-year vest like you'd have with the TGE for a VC-backed token. This is, this is like, you know, I think much more mercenary in nature.

And even on, even on the— So then as the investor, how do you think about that? Is it like, hey, let me, let me get in this thing, let me do this deal and let me get out in 6 months?

Well, I think that it depends on, on the deal that we're looking at and the team and really like our, our view around them, the market they're in.

You're not trying to hold these things for the next— you know, if you make a private investment, you're in a company, you're holding that for at least 4 years, hopefully, you know, probably longer, 5, 6, 7, 8, 9, 10 years. For these, it's a much shorter time horizon, right?

Yeah, I mean, I think the, the like exit decisions on, on anything are going to be dynamic, and it's going to be based on like what, you know, where it trades relative to kind of fundamental. So in this case, the key fundamental is MNAV. So if something were to trade at like a massive MNAV premium, like the, the bias would probably be more towards, you know, a de-risking decision, whereas if something trades closer to that 1x threshold, the decision may tilt otherwise. I think it's a bit more dynamic, but I would say yes, in general, I think a lot of these Bitcoin treasuries, let's just call a spade a spade, these things are financial instruments, more financial investments. These aren't technology bets. I think the capital involved is a bit more mercenary. Yeah. And economically focused rather than, you know, typical like venture capital, which is more like, you know, founder, founder focused. But I think there—

I agree with that. And where we are more positive is there's a— there are a small, small sliver of companies where like management has their, their incentives locked up gated based on Bitcoin yield, for example, very clear kind of dynamics on the cap table where they're not trying to hide anything, and a group of investors that are longer-term thinking. So we do try and work with those people. That's a big part of what we look for. And I hope that that starts to become the norm. But to Ben's point, especially with the velocity of these, I do see a lot of the vehicles being much more opportunistic, where effectively the sponsor and the banker groups have a lot more free option vis-à-vis the other constituents because they're going from zero to whatever they can exit at. But there are— there is some optimism in a couple of great teams in the space that are trying to build something for much more the longer I don't know actually the right way to ask this question, but it's been—

it's what we were talking about at the Coinbase Summit, which is you're like, oh, you should just do one of these things, right? Kind of like, I mean, I know you're kind of joking about that, but, you know, I did. I got dinner with Saylor back in March and he's like, you should really do one of these. Like, you should turn Block— either turn Blockworks into one of these Bitcoin treasury vehicles or go do something on the side. You guys have the marketing arm and you can find the— because you need to— you need two things, right? You need the financial genius, you need the marketing genius. You know, we've got the marketing distribution, I guess, pretty down. I will say, and this is where I don't really know how to ask the question without kind of bashing anyone else, is like the people who are doing these seem to be the same group of people who kind of did the SPACs in 2021. It's like it, it feels a little charlatan and like really marketing heavy and kind of a cash grab. And how do you think about that from like the reputational Like the, I don't know, do you know what I'm saying? I don't even know the question to ask here, but do you know what I'm saying?

Yeah, I, I, yeah, totally, totally kind of get the, get the gist of the question. And I, I think that the way we've kind of like looked at these things, because look, we have a lot of portfolio companies that come to us and say, should we do one of these things? And, um, the way we kind of have looked at this is if you have a great operating business, uh, you know, and you do a Bitcoin treasury strategy and you combine those two, you struggle to get credit for both. Like, it's a case of like 1 1 1.5, um, because the market has to like take the operating business cash flows, ascribe a multiple to it— let's call that like A— and then look at the NAV of the crypto, call that B, and then value A B. And it's like, it's complex. And so Typically, the companies that have pursued this, or the people that have pursued this, are doing this from true shell entities where there's not a very strong existing operating business. MicroStrategy is a bit of an exception. I mean, their operating business was not doing well, but it's actually doing $75, $80 million of EBITDA a year. So it's actually a real business. But what I would say is, well, one, I think Blockworks as you and Mike have built an incredible business that's very well respected in the space that has a lot of promise and a very strong financial position. I think that to combine that with a Bitcoin treasury or crypto treasury play would be throwing out the baby with the bathwater, so to speak. I don't think it would be enterprise value maximizing. Um, but, um, I certainly think that like people like yourself that have like very strong marketing presence in the space, um, as well as financial acumen, certainly have the ability and option to go de novo pursue these ideas. And like, I think you've seen with this first wave of people that have done it, they tend to be people that have, you know, followings and personas and microphones. Um, And, and there is this principal-agent problem. I mean, it's like there's, there's money to back the, those, those, you know, personalities. So, so if I were you, I wouldn't start one of these things. But that's, that's just me. Yeah.

Yeah. Yeah. It's interesting. What about the price? I posted in like the Empire Telegram channel. Like, what do you guys want? What do you guys want to know? You know, you know, talking to Ben and Josh and The first question that someone asked was, when will all of these crypto vehicles actually result in on-chain price action? Basically, you've got these Bitcoin vehicles, they're all raising all this money. And, you know, you see in the headlines, you know, X company just bought 7,000 Bitcoin and the price of Bitcoin doesn't move. Or like all these ETH vehicles right now, like S-Bet and Lubin and like all these things. And, you know, they're buying like tens of thousands of ETH, but the price isn't moving that much. Why is that? What's the dynamic?

Yeah, well, I think there's a couple of factors. One small asterisk is in some of these deals that are pending SEC approval, the cash many times sits in escrow, so it actually doesn't hit the market even though it's a large announcement. A lot of announcements are also ATM program announcements, and so the numbers look big, but that's going to happen over a long period of time. So that's a small asterisk. But I do believe— and it's always hard to attribute where performance comes from in a global sovereign asset that can be bought in so many venues. But the performance of Bitcoin throughout the first half of the year, I think part of that did have to do with at least the first wave of Bitcoin treasury companies. What I think is a little bit more interesting to share with those folks is this year, in my opinion, has marked a fundamental shift in who the marginal buyer is for Bitcoin. In 2013 to call it 2017, it was individuals, and then it became funds and capital vehicles that were leaner and could move faster. And now we're entering the era of public companies and governments, which can not only buy in size but will retain those assets on their balance sheet for a much longer period of time. And so if you, if you have some kind of patience and, and see all this play out, uh, what's effectively happening is, is supply is getting constrained at a, at a greater clip than before. Um, and I think that's going to add a very interesting dynamic, uh, especially when you combine governments as kind of the largest and most patient owner of assets coming in after these, these entities.

Got it. I don't think I follow why it doesn't impact the price of— why Bitcoin and ETH haven't— why hasn't ETH gone up a bunch if, you know, S-Bet is buying a bunch of ETH?

Well, well, I mean, look, like, if you look at Bitcoin, just to put some numbers around what's happening, so public companies at the beginning of 2025 held 600,000 Bitcoin. Uh, today they hold about 850,000 Bitcoin, so they've accumulated about 250,000 Bitcoin year to date. Um, that's about 1%, a little over 1% of, of all Bitcoin in 6 months. Now, over that time frame, uh, year to date, Bitcoin's up about 20%. Um, 20% on a $2 trillion asset is roughly, you know, $400 billion of, of, you know, market value, uh, you know, uh, mark-to-market value. Like, I think, I think one of the—

look, like, I see where you're going with this.

I think, like, if you look at, like, the, like, kind of stock-to-flow and, like, kind of this idea of, like, a flow amplification multiple— so for every dollar of fiat that buys Bitcoin, how much market cap does it create? Um, historically, that number, like, there have been different studies that have been done around this, is like somewhere between, like, 5 and 20, I guess, is like reasonable multiples. But I think the reality is like, I think the Bitcoin price has moved, but offsetting it, um, is I just think it's like the law of large numbers. And if you look at like vol on Bitcoin, I mean, it's come down like over like the past 10 years, it's just drifting lower. And, um, I think we've, you know, we've personally— my, this is my, my personal view is like we kind of moved out of the 4-year cycle. I think for alts, for Bitcoin, I do think we're in like a new, new environment where I think Bitcoin is a bit more of a, of a compounder. And I don't think we'll see the— I, I personally don't think we'll see the big drawdowns that we've previously seen, like the— I'm talking about the 60 to 80% drawdowns. I still think we'll see meaningful drawdowns, but, um, uh, but, but I generally— but, and I also don't know that we'll see the, um, you know, like the square wave up moves to the same degree that we've seen historically. Bitcoin's just grown up as an asset. It's just much bigger, and it takes more dollars to move the price. Then on the ETH point, well, a lot of these ETH treasury strategies— actually, there was a surprising moment in the market. It was bizarre. There were like 60 or 70 Bitcoin treasury strategies there were like 10 Solana treasury strategies and there were like no ETH treasury strategies. Because I mean, ETH, as you know, has, has been a bit of a punching bag. It's been a tough story for the past, you know, couple of years. Like, the ETH-BTC ratio has continued to bleed lower, um, and most of the ETH treasury companies, like the three largest ones—SharpLink, Bitmine, and BitDigital— have all been like very recent launches. And so I think like, and if you look in the past, say, week or so, I think ETH has a bit more of, more of a bid.

Where does ETH end the year, Ben?

Oh, the, the tough questions. Okay, so, you know, I, I would say like, I think ETH, I think the sentiment around ETH has gotten better in the past few months. And I think people are looking at ETH now as if you want to go long the growth of stablecoins, um, one framework to think about like value accrual is like, you know, you own ETH the asset, um, and, uh, you know, all, uh, you know, I think 60% of all stablecoins are on Ethereum, um, with another like 25% on Tron. Um, so like, ETH is fairly dominant in terms of like general purpose smart contract platform, in terms of like stablecoin TVL. And stablecoins are like, you know, next to crypto treasury plays as like kind of like the focus in the market right now. Um, and, and so look, like, I, I think that narrative is picking up. Um, but, um, I think the other dynamic though is like, ETH is a ETH is a $300 billion asset, and, um, it's a technology bet. I don't think Bitcoin's a technology bet anymore. Bitcoin is like a finished product. Like, Bitcoin does not need to change, and it's, it's, it's kind of more of a macro asset now. It's a financial bet on monetary fiscal irresponsibility. It's a supply-demand bet on like fixed supply. Like, but it's not a technology bet, and Bitcoin has no competition. As a non-sovereign store of value. I mean, it has competition, but it's, it's in a monopolistic position in that seat. Whereas Ethereum, I think many people have fundamentally, and rightfully so, questioned whether or not it will be the MySpace of, uh, smart contract platforms. And, and so it's— I think that's deterring some flow, you know, buying ETH, because now you're like, oh, I should also buy some SOL. And I should also buy some other L1s and L2s because I just don't know who's going to win. And so I think the story around Ethereum is much more complex than Bitcoin.

Hey everyone, Jason Yanowitz here. Wanted to just take a quick break and highlight everything that's been going on in the Mantle ecosystem. In just one year, Mantle has seen its TVL surge by over 1,100%, now reaching $1.7 $6.9 billion. That's just such a crazy amount to think about. More than 225 protocols have made Mantle their home, while the platform's Eco Fund has invested $38.5 million in 51 pioneering projects. Through strategic partnerships with Bybit, including MNT as collateral, supporting Athena to scale and the first Ethereum L2 to integrate Ondo Finance, They just continue to be on the bleeding edge of L2s. Be sure to stay up to date with what's going on by giving them a follow on X @0xmantle. Special thanks to the incredible Mantle team for sponsoring today's episode. I wanted to take a moment to tell you about today's sponsor, ZenRock, the permissionless decentralized custody network backed by 1Roundtable partners, 10T, Maven11, and Spartan. Now available on Jupyter ROCK is the native token for transactions within the ZenRock ecosystem and secures ZenRock's decentralized custody network. The first application launching on ZenRock is ZenBTC, yield-bearing Bitcoin on Solana. ZenBTC will be live in April 2025. To find out more, you can follow ZenRock on X or click the link in the show notes. Ever wish you could access cash without selling your Bitcoin? Ledn, the global leader in Bitcoin-backed lending, makes that possible. Since 2018, they've issued over $9 billion $1 billion in loans, and not a single Satoshi of client funds has ever been lost. Here's what makes a Ledn loan different. With custody loans, collateral is not lent out to generate interest. No credit checks, funds in less than 12 hours, and no monthly payments. Repay whenever you want with zero penalties. And they don't just talk security, they prove it. Ledn offers proof of reserves reports verified by a top accounting firm every 6 months. Ledn is 100% focused on doing one thing better than anyone else: giving Bitcoin holders a secure, transparent way to unlock liquidity without selling. Click the link in the show notes to find out more. As always, investments in blockchain technology involve risk. Terms and conditions apply. So getting back to the crypto treasury vehicles, maybe this— tying these two concepts together. So we've got the Bitcoin ones, we've got a lot of Bitcoin ones, we've got a good amount of ETH ones, we've got a few SOL ones, but There's a few more SOL ones coming to market pretty soon, I think, you know, later in July or maybe August, whenever it is. I've seen some fundraising for like an Athena one. I've seen some Hyperliquid and I've seen like TAO. And beyond those 6 assets, I haven't really seen any. But I'm curious if you guys think like, are we going to get these vehicles for the top 50? I originally thought yes, but now I'm like, oh, maybe that was a silly thing and that's not going to happen. But tell me, tell me how we should think about that.

I, I believe you will see more vehicles with, uh, longer tail assets, uh, you know, outstanding. There's also, uh, one or two XRP ones. There is a, uh, um, Tron one. Um, there, there'll for sure be, I'm sure, a couple of BNB ones. So I, I do, I do believe you're going to see more I would kind of bring back, you know, Ben's view on needing to reach an equilibrium before that stops. And so as long as the constituents in the market provide the capital and the shell company to do so, I do think there's going to still be more altcoin treasuries coming to market. The biggest question that I always you know, pose to those founders that ask us, because a lot of folks do call us and say, hey, should we do this? Is like, what is your long-term strategy? Because yes, you could maybe get out the gates with the first round if you effectively have all the investors that already own your token subscribe in kind with some cash. So you can clear step one, but then who's going to really come in to buy Token250-related holdco in terms of the next round, once you've exhausted the most aligned people already. So my hypothesis is while you will see more of these come to market, the success rate at raising another round will be immensely lower than that of Bitcoin treasury companies globally, for example.

Yeah, that's interesting. Can you walk through actually on the— so like the in-kind part? Because my understanding is like these Solana vehicles that are raising right now are having a decent bit of success because there's so many funds that have locked Solana right now. So you can kind of contribute that Solana in-kind. Can you walk through this dynamic? Yes.

So I think at a high level, there's two attractive characteristics of this, uh, this vehicle proposition to a current investor that has, uh, locked vesting exposure, uh, if we all put our hats on as those investors, one is I can now expedite my timeline to liquidity, and two, I can effectively, uh, kind of garner some like quick gain if there's a mechanic where I can take a discounted asset and realize it immediately that they're both tied together. But I believe that's why some of these vehicles are of interest to those investors. Again, I think the key question I would bring up is who is going to be the buyer on the other side? And I find that for some of these, the answers is truly difficult to say. To kind of figure out because you're going from a very constrained, low, like, high awareness circle but very constrained into like the public markets where, you know, not only do you have to tell your story as a company and explain the whole accumulation strategy, but you also have to go and educate them about what your asset is and what it means. And Yeah, I just, I see a lot of difficulty, to be candid, in raising successive rounds. But I do understand from a very objective lens why certain investors would, would see these vehicles as interesting, because it is beneficial to them, especially if they're locked, for example.

Yeah, I guess you also just don't get the— I mean, Strategy can issue almost $10 billion in convertibles at almost zero zero coupons, right, with these far out-of-the-money strikes because it's— because it's Bitcoin as the underlying. But if your underlying is like some random L2 token, you don't really get the— I think, Ben, you mentioned like the Swiss Army knife of financial instruments. You know, those instruments aren't really available to you if your token's been down only for the last 3 years, right?

Yeah, no, I think that's right. I think the dynamics are different on the altcoins. I, I will say though that there is that this really interesting dynamic that Josh touched on, which is the time preference. So like the time preference of these public company treasury vehicles is, uh, is very low. Like they, like if you could give Michael Saylor the option to acquire 5-year locked Bitcoin at like a 2% discount, he'd probably like prefer to buy that than like buy unlock Bitcoin at spot, right? As just like a hypothetical scenario, because his time preference is so long, you're saying? Yeah, it's so long. Like, he, he, like, he's, he's going to hold— his plan is to hold forever anyway, so he can. And then he already has so much liquid Bitcoin that, like, he could sell that initially if he needed to, if he needed the, the liquidity to either buy back his stock or, or, or do something else. So the, the reality is, is like these public treasury vehicles have a very long time preference relative to, uh, you know, retail and venture investors that hold these locked tokens. So it's almost like a transfer of that time preference. The arbitrage is that you're putting— you're, you're kind of moving the time preference into a longer time preference vehicle, um, and, and as a result, the discount gets much, much tighter. Um, so I think it's possible that You know, I think a lot of these entities, right, that issued tokens, right, and they're now just like these legal entities that pay developers to like continue to innovate, but they don't have a core business model, will end up being like the vessels that combine with public companies. And, and I, I think the other element Josh touched on is a great point, which is like marketing. Like if you do have a public company, um, you can at least tell your story to public market investors around what you're building. So there it is, like a billboard. Um, in addition to being a financial, um, accumulation play, it is just like a billboard. Here's what we're building, here's why it's important. Um, and, uh, it, it's like a way to expand your microphone. And so I do think there's, there's some benefit from that. 100%.

100%. It's fun. I mean, what do you make, Ben, what do you make of this idea that like the liquidity in crypto is now in the capital markets? It's not It's not on-chain. I mean, it's, um, yeah, it feels like Circle's IPO was the moment where it's like, ah, it's, it's game on in the public markets right now, right?

It's, um, it's, it's not necessarily like the, the future we all like were kind of like building towards a few years ago. Um, but, um, yeah, and I was like actually looking, you know, um, there's a great website by the way called bitcointreasuries.net, um, that tracks a lot of like the Bitcoin holdings. And I was looking on there, and like, if you look at the ETFs plus, uh, public companies, those two kind of constituencies now own 10% of all, of all Bitcoin. 10%, which is very, you know, very, very meaningful. And these, these ETFs just launched like, you know, a year and a half ago. So you can kind of like imagine a state of the future that like where, you know, maybe 20, 30, 40% of all Bitcoin is owned by public entities. Um, and, and, and look, is that, um, what, what do we make of that? I mean, it is— I, I guess like it's, it's one thing, one conclusion to draw is that, you know, equity, like the equity wrapper, is still the kingmaker in terms of like it's the easiest to trade, um, it's the most accessible, um, and it's the most liquid. And You people don't care about 24/7 liquidity. They're fine with, um, you know, 8 hours a day, 5 days a week liquidity, I guess. Uh, so, so like, it's, um, uh, but, but, you know, on the flip side of that, like, if you look at the DEX to CEX, um, you know, volumes, like, yeah, it's going up. And, and actually, part of that, I think, is like centralized exchange volumes are, are kind of like a bit, uh, flatlined a little bit. Flatline because I think like they're competing more with like the brokerages, but DEXs I think are still really good at the long tail. So I think like the centralized— like if there are 3 groups, like the trad traditional equity markets, the centralized exchanges, and the DEXs, like I think the centralized exchanges have maybe, uh, shown the most like kind of market share loss of those 3 because of that, that dynamic. Yeah.

Um, if you guys had a dashboard up and you're kind of like looking at a dashboard, you put a few metrics on there to look at, like, have we moved into, uh, risky territory here? Like, you've got kind of like a top signal dashboard. What metrics are you looking at? Is it like option skew, like borrow scarcity, premium velocity, like convert— you like what? I don't even know.

Like, what are you looking at? So So Josh will probably have like a better answer than, than me on this, but I'll kind of like keep it really simple, which is like, I think the, the bellwether North Star KPI for this whole ecosystem is the MicroStrategy MNAV Premium. Um, that I think is like a very important, um, one to keep an eye on because, you know, MicroStrategy still owns 70% of all, of all the public, uh, company-owned Bitcoin. MicroStrategy is still 70%. Of that market. Um, and, um, you know, they're also probably the buyer of comp— of other companies if they trade below, uh, below 1x MNAV. So I think that is like the— that, that I think is the best, um, or most, um, high signal metric to evaluate in terms of understanding the longevity of this particular kind of like market cycle.

Yeah, no, I think that's very well articulated. Um, I, I, you know, what would my dashboard have? Uh, I, I would, I would definitely have that. I would also add, you know, what does ATM activity look like? One of the good things about MicroStrategy is they're, they're very open with how they disclose ATM activity, and so you can measure it week to week because that kind of gives a little bit of a signal of how much capacity there is you know, to, to absorb. And, um, we can then go and, and take that and use it as a forecast for what does relative capacity look like in, in other instruments to absorb, um, you know, more creation of these instruments. So, so that's definitely one. Um, looking at the, uh, trading activity of, of like the OTC markets— a lot of these international plays actually have OTC listings in the US— and how that's faring, because there is this fascinating phenomenon, and maybe it's for another time, of kind of the tail wagging the dog, where these OTC instruments actually drive price action in local markets. Um, and then I would also, uh, take a look, um, at what exactly is happening in the capital structure in terms of, yes, Bitcoin for sure, but can we go deeper? Um, what's the rate of share issuance? What are the type of, of buyers that it's going to? Because I think you can then understand, you know, how that capital table is evolving, because when things go south, you know, that, that's going to be really important to know who the marginal actors are in these treasury plays. And then I'll highlight one metric that has sparked a lot of debate. I wouldn't know if we'd have it on our dashboard, but it's one that we find really interesting. This quote-unquote days to cover has emerged as a topic of conversation in the treasury community, which is at the current pace of Bitcoin accumulation, how many days does it take you to cover your full NAV or to effectively get to NAV on the market cap standpoint? It's interesting because it does allude to this idea of the velocity that your Bitcoin per share is expanding and the ability for others, in my opinion, to justify buying in at a higher price. I do still believe that the jury is out on whether that is a true indicator of your ability to enter in, or if you kind of study the history of speculation, there's a great book by Edward Chancellor on it actually. People do also make metrics then justify higher valuation. So I think it's a really robust debate within ParaFi about is this a metric used to justify higher MNAVs? Or is it really a way to articulate the pace of Bitcoin accumulation? I think there's arguments for both, but that's one that I've seen on a lot of other people's dashboards.

I also wanted to just add one thing because I just want to address something head-on, which is a question that we get asked a lot about, which is when will there be forced selling of this Bitcoin or ETH or SOL held by public companies? Like, this is a very common question because people are viewing these as like very levered, um, plays. But I, I just want to highlight that, um, uh, the capital structures of these companies are generally effectively equity only for the most part, with the exception of, uh, the most levered one is MicroStrategy. However, they have no debt. It's all converts. And the, the way they've struck the converts are at about 15% loan to value. Said differently, there's about 7 times more Bitcoin NAV than there is convert debt. They've structured this in such a way where their converts, they're generally 0% coupon, so they don't have to pay a lot of cash flow to service those converts. Then the other interesting thing is SAILORS tronched up the converts so they mature like every 1 to 2 years. Like, there's no big cliff maturity. So it's, it's like a very, very manageable and I think durable and resilient kind of capital structure the way he's, he's designed it. Like, there's no debt, there's no— and there are no covenants on these converts either, where, um, you know, like lenders can like kind of come in and, and like force liquidate the Bitcoin. So I do think that like, at least today, and like it could change because these Treasury companies will compete, and maybe one of them wants to go further out on the risk curve to differentiate. But as it stands today, the ones we've studied, there's effectively no teeth that creditors would have to force liquidate the Bitcoin, which I think is something really, really, really important to to, uh, like, just highlight for, for people. Yeah, interesting.

Um, as we think about wrapping up, Ben, what do you think about the— or, or Josh, either of you guys, or both. Um, like, if we think about kind of the end game for these, or maybe not even the end game because there's no real end game, but like, uh, a couple years out, what is it, you know, as the, as the dust settles and like the, you know, people start getting the ability to sell, like, is, is MicroStrategy just gonna buy up a bunch of these? Is this like Will we have these things for like the top 50? Like, what is this? Will every major index include at least, you know, several crypto treasury companies? Like, what is this? What is it? I don't know if you guys have a vision yet on what this looks like, but would love to hear it. Josh, you're smiling, so you can go first.

You know, I'll first start by saying that this, um, while a lot of these I do— to Ben's point, I do think will go to a discount. Um, it's a completely new era for our asset class in the sense of the amount of new instruments created by all of these entities, not just their own shares but converts or option chains, will effectively kind of breed a whole new ecosystem of, uh, investable opportunities. That will shift as volatility changes, as idiosyncratic factors in these companies change. And so what does the end state look like? I think it is going to be, you know, generally a lot of these will trade at a discount and will be consolidated or liquidated. I think others will find, as their market leadership strengthens, the ability to access new pools of capital. Like, I would if viewers have time, there's a great section, and I think it's a Q1 '25 strategy earnings call where Saylor kind of gives a bit of his roadmap to how he wants to get to institutional-grade debt. So I think some— I think that the top ones will be able to access new markets that we haven't seen today. And I do believe personally that global capital markets will each have a homegrown player or some form of exposure domestically to capture those pools. So I, I, I believe, you know, fragmentation should, should, uh, uh, be reduced, um, in, in home markets. But then globally, I, I do see a, a kind of, uh, strong case to be made that there should actually be multiple of these in other markets. Um, yeah, so that's my endgame.

Yeah, look, I, I just, you know, in, uh, I think my, my points are one, consolidation, is, I think, inevitable. Two is business model adaptation. So you own the Bitcoin, but you're going to want to pursue yield opportunities. You're going to want to build Bitcoin-enabled business models. You're going to want to generate cash flow from other real assets. So I think these— like, right now we're in the accumulation phase, but I think we're going to move towards a phase where it's like the question is, how do you differentiate? And then the last thing I'll say is, um, You know, Figma, uh, this, you know, was covered, like, had, you know, when they filed their S-1, they held, uh, you know, some, uh, Bitcoin on their balance sheet in the form of the, the bit— they actually held the Bitwise ETF. But I, I thought that that was like one of the more bullish signals because they're not a Bitcoin treasury company, but they are a public company, a very reputable technology company that just holds Bitcoin on its balance sheet because, uh, from an asset allocation standpoint, believe that's like a prudent place to put their cash and marketable securities, to allocate some, some to Bitcoin. And I think what the, the, the, the, um, domino that hasn't fallen yet is like a Mag 7 company putting a slice of their cash into Bitcoin. And, or even a top 4, like, I guess, I guess like Tesla has, um, so, uh, but, but it hasn't been like ubiquitous across, say, like the Fortune 50 or the Fortune 100.

Yeah, we haven't seen Google or Meta and like I would kind of discount Tesla because of Elon's just craziness. And it's almost like if you're an institution, as they would say, you haven't seen a quote unquote real company. I mean, Tesla is real, obviously, but like I think, I think people get what I'm saying. Yeah, 100%. Yeah.

And I think that when we start to see that, I think there'll be a bit of, bit of—

so, so, Ben, I just saw this from, from Bitwise. Which is the— it's a great thing. People can pull up just Matt Hogan's Twitter and they can look at it. It's the Corporate Bitcoin Adoption Update. So we've got 800 total Bitcoin holdings, $847,000, up 23% quarter over quarter. Total value of the Bitcoin holdings by— this is corporate adoption— is $91 billion, up 61%. Number of public companies holding Bitcoin is at 125. I'm curious, maybe to— if you look at the top holders though, it's all of the— yeah, it's like Strategy21 and Riot and MetaPlanet. It's the miners. It's the companies that we're talking about. When do you think we will see a— you know, I got to figure out a better way to put this, but like a real, you know, like a Fortune 500, like not just a Bitcoin company buying, you know, let's say a decent chunk of their treasury goes into Bitcoin. When do you think we see that?

Um, I, I, look, I, I think that it's, I think that it's like a next 12-month, uh, time frame, um, is, is my view. And by the way, like, the cash on the balance sheet of, of the Mag Seven, I'm tempted to like, you know, go into Grok and, and like look it up right now to give a more precise figure, but it's like, it like dwarfs, uh, you know, it like the, the amount of cash on these balance sheets is like orders of magnitude more than like the market cap of all crypto. So even a, like, you know, I think it's a dangerous game to be like, oh, this is like really big numbers, so even like a really small allocation would be a big number. But I think the reality is, is like we've never been closer to getting like the largest, um, cash, um, but like these MAG7s, like, they, they hold more cash than any any, uh, any companies in the world, any endowments, any foundations. Like, these are the largest potential buyers for Bitcoin, and like, they're completely sidelined. They're on zero. And so that, I think, is like, um, I think that, that is the big unlock. And, and by the way, like, when, when Meta buys, I do think like Microsoft and Nvidia and others, like, they have to give themselves the hard look in the boardroom and say like, why are we at zero if our peers are starting to get off zero. And so that's when I think, you know, things, things will get, will get interesting.

Hyper-Bitcoinization, potentially.

Yeah, I mean, I, I, yeah, like, I, I don't know what, you know, I, um, I think these are pretty interesting times. Like, I also think that the other, the other dynamic that has kind of been forgotten about, by the way, by the market, is like, people are talking about it beginning of the administration, is like the National Bitcoin Strategic Reserve. And like, they obviously came out and said, hey, we'll figure out like budget-neutral ways to acquire Bitcoin. And then things just like went silent. The market was kind of disappointed by that. But, um, I wouldn't be surpris— like, I, I think that like there's— the market's like not at all focused on, on that. And I, I think they're— I think that's the other potential like upside catalyst that could, that could play out in the next year. Yeah, yeah.

Ben, Josh, this is great. Anything else that we're missing from these public vehicles that you guys think is important or just, you know, on LP calls, questions you guys are getting that are maybe important to surface to light?

I mean, the only one from, from my standpoint is for a lot of these, they do tend to provide kind of rich resources on everything going on related to their balance sheet and For those curious or investors in these assets, I would always push to do the hard work on understanding what exactly is outstanding from a fully converted, fully diluted share base and how many assets or how much in Bitcoin or other assets they do have on their balance sheet. I think one thing we've learned having looked at like 60, 70+ processes is you truly have to drill down to the numbers because a lot of times people won't bring up these outstanding warrants or these fees. And so I just think being extremely diligent as more and more of these come to market is critical to picking everything up and making sure that you fully are aware of the kind of asset you're entering into.

Yeah. Cool. Ben, Josh, thank you guys.

Thanks, Jason Yanowitz.