Written by: Matt Levine

Translated by: jk

Bitcoin Treasury

The basic logic is as follows: the U.S. stock market is willing to pay $2 for a cryptocurrency worth $1. If you have a large amount of cryptocurrency, the best approach is to find a small publicly traded U.S. company to merge with, thereby doubling the value of your cryptocurrency. This phenomenon has given rise to some peculiar market dynamics, which will further trigger more oddities. Two noteworthy points are:

First, if you own a large amount of cryptocurrency, you definitely need a publicly traded company, so providing shell resources for public companies to cryptocurrency investors has become a good business (especially for small public companies with little existing business, as they can easily transform into pure cryptocurrency holding platforms). For example, if you have $100 million in Bitcoin, merging with a public company can make it worth $200 million, so even if this public company has no value other than its public status, you would be willing to pay its shareholders $40 million.

Second, if you own a large amount of cryptocurrency, don’t sell it to cryptocurrency buyers; instead, sell it to the stock market. Suppose you have 1,000 Bitcoins; selling them on the Bitcoin market would only net you $118 million, but if you package them into a Bitcoin treasury company for public listing, they could be worth $236 million.

Regarding the first point, we often discuss cases where small public companies are acquired by cryptocurrency entrepreneurs and transformed into Bitcoin treasury companies. However, this approach is both inefficient and arbitrary: if you want to publicly list a cryptocurrency on a stock exchange, why go find a defunct public biotech company, negotiate with its executives, finalize a deal, and then fire those biotech researchers? Why don’t investment banks directly provide ready-made public shell resources, so you don’t have to struggle to transform a biotech/toy/alcohol company into a cryptocurrency company, but can start from scratch?

Of course, banks are indeed in this business. This business—providing publicly listed shell companies—is the SPAC business (Special Purpose Acquisition Company). Cantor Fitzgerald LP (whose CEO was once the U.S. Secretary of Commerce) specializes in this business: both in the regular SPAC fundraising and in the specialized business of merging SPACs with Bitcoin pools. We mentioned Cantor Equity Partners Inc. in April. This is a SPAC under Cantor that announced an agreement with Bitfinex/Tether and SoftBank to package their Bitcoin into a publicly traded company. This company will be named Twenty One Capital Inc., and the SPAC is currently trading at a premium of about 200% relative to its Bitcoin value. This deal is very favorable for Tether and SoftBank. It is also beneficial for the SPAC sponsor Cantor, which will reap substantial returns from this transaction.

Here is the press release published this morning:

Bitcoin Standard Treasury Company goes public through a business combination with Cantor Equity Partners I Inc.

BSTR will start with a balance sheet containing 30,021 Bitcoins—making it the fourth largest publicly traded Bitcoin treasury—while securing up to $1.5 billion in PIPE financing, the largest PIPE related to a Bitcoin treasury SPAC merger to date, with the SPAC itself contributing about $200 million (exact amount depending on redemption).

BSTR Holdings Inc. (“BSTR” or “the Company”) today announced that it has signed a definitive business combination agreement with Cantor Equity Partners I, Inc. (“CEPO”) (NASDAQ: CEPO). CEPO is a special purpose acquisition company sponsored by a subsidiary of Cantor Fitzgerald, a leading global financial services and real estate services holding company. Upon completion of the transaction, the combined company is expected to trade under the ticker symbol “BSTR”…

The net proceeds will be used to acquire more Bitcoin and build a full suite of Bitcoin-native capital market products and advisory services.

That’s right. BSTR holds approximately 30,021 Bitcoins. If sold directly, these Bitcoins would be worth about $3.5 billion, but if sold through a public listing, they should be worth at least $7 billion. Cantor Fitzgerald specializes in providing public company resources for Bitcoin pools, so BSTR chose to merge with Cantor Equity Partners I—not the Cantor Equity Partners involved in the Twenty One deal—to push its Bitcoin pool into the public market. The value of BSTR’s Bitcoins on the stock exchange will far exceed their value as Bitcoins themselves, and the SPAC sponsor Cantor will benefit from this.

However, I want to focus on the second odd phenomenon: “If you have a large amount of cryptocurrency, don’t sell it to cryptocurrency buyers.” Cantor Fitzgerald has already launched a cryptocurrency treasury company called Twenty One. The business model of Twenty One includes: (1) accumulating Bitcoin, (2) maintaining public listing status, (3) talking extensively about innovation, the future of currency, Bitcoin capital market services, and so on. BSTR’s business model is essentially the same. Twenty One is a Bitcoin pool, and BSTR is also a Bitcoin pool: why do they need to go public separately? Why do investors need to choose between two essentially identical pure Bitcoin pools? (Not to mention there are other similar companies on the market, as well as MicroStrategy. I just want to point out that two large Bitcoin pools are going public in succession through Cantor Fitzgerald’s SPAC within a few months.)

You can imagine a scenario where the BSTR team approaches Cantor Fitzgerald and says, “We have a Bitcoin pool that needs capital market advice,” and Cantor responds, “Great, we actually have a good relationship with the folks at Twenty One. We helped them go public. They have a large Bitcoin pool with a ‘business structure that can support the creation of financial products based on Bitcoin,’ and their business is built on ‘strategically allocating capital to increase the per-share Bitcoin holdings.’ Moreover, their stock trades at a significant premium relative to Bitcoin value. So our plan is to contact them, have them issue some stock to raise funds, and then acquire your Bitcoin pool at a good price. How does that sound?”

But this is foolish because BSTR does not want to sell Bitcoin as Bitcoin. If you sell Bitcoin on the Bitcoin market, you can only transact at the Bitcoin price! But if you package Bitcoin as stock, you can sell it at a 100% premium! BSTR wants to go public itself, not sell its Bitcoin pool to someone else.

The Financial Times reported on this transaction on Tuesday:

According to two people familiar with the matter, the blank check company Cantor Equity Partners 1, which raised $200 million in cash in its IPO earlier this year, is in late-stage negotiations with Blockstream Capital founder Adam Back to acquire digital currency worth over $3 billion.

This transaction echoes Brandon Lutnick's $3.6 billion cryptocurrency acquisition deal with SoftBank and Tether in April, further advancing Cantor Fitzgerald's strategy of acquiring Bitcoin using publicly listed shell companies, aiming to capitalize on the surge in digital currency prices amid U.S. President Donald Trump's deregulatory policies…

Back and Blockstream Capital will exchange their Bitcoins for shares in the Cantor vehicle, which will be renamed BSTR Holdings.

In other words, one perspective on this transaction is that Cantor is “acquiring” Blockstream’s Bitcoins, just as it previously “acquired” Bitcoins from SoftBank and Tether. But Cantor is able to acquire at a significant premium: it does not have to pay cash but instead uses shares of the (newly formed) public Bitcoin company to pay Blockstream, and these shares typically trade at a premium of over 100% relative to the underlying Bitcoin. Cantor’s “currency”—public Bitcoin company shares—is worth more than cash.

Twenty One has a similar “currency” (its own shares). You can imagine a transaction where Twenty One uses its stock to acquire Blockstream’s Bitcoins. But how is the price determined? The core of the Bitcoin treasury business model is that Twenty One can issue stock at a premium, using the raised funds to buy Bitcoin, thereby increasing the per-share Bitcoin holdings. But this is also the core of Blockstream’s model. Blockstream wants to obtain a premium for its Bitcoin holdings, but Twenty One is unwilling to pay a premium to acquire more Bitcoins. (It wants to “strategically allocate capital to increase per-share Bitcoin holdings.”) Transferring Bitcoin to the public market can create enormous value, and each Bitcoin pool holder wants to capture that value for themselves.

In the long run, is this model sustainable? If every Bitcoin whale can make more money by establishing their own Bitcoin treasury company, how will existing Bitcoin treasury companies continue to acquire more Bitcoins? Of course, there are some small investors; if you only have 0.1 Bitcoin, you won’t go public for that, so you will still sell to MicroStrategy, Twenty One, BSTR, or other companies. I think there will eventually be stock-for-stock mergers between Bitcoin treasury companies. Those with lower premiums will be acquired by those with higher premiums. I look forward to seeing the fairness opinions on these transactions.

In any case, so far, the performance of the BSTR transaction does not seem ideal: this afternoon, the SPAC stock was trading at about $13.93 per share, which means BSTR’s Bitcoin reserves have only about a 39% premium, far below the over 100% premium I would typically expect. Perhaps the market for such transactions is finally starting to saturate?

Meme Coin Market: Don't Ask, Just Know You Haven't "Gotten" the "Vibe"

In traditional financial structures, if you work at a bank and a client approaches you saying, "I want a tradable instrument X that reflects the price of another thing Y," you have to carefully consider how to link X and Y. You might think of designing some sort of arbitrage mechanism that allows holders of Y to exchange it for X, thereby keeping the prices of X and Y in sync. Perhaps you could construct a basket of Y, and then X would be a tradable ownership share of that basket. Maybe you could call three banks every day to inquire about the price of Y and take the average as the daily settlement price for X. Perhaps the settlement price of X could be derived from the historical levels of some non-tradable index of Y. The specific solutions vary, but overall, it’s a challenging problem. For example, "I want a tradable instrument that reflects U.S. housing prices": of course, this is a great idea; we all want it, but which houses specifically? How do you ensure that this instrument accurately reflects housing prices?

Then a truly great financial innovation emerged in the cryptocurrency space: you can completely bypass those complex designs and rely purely on "vibe." You announce, "I’m launching a new token, HomePriceToken, which will reflect U.S. housing prices." Then a traditional finance professional like me would ask, "Wait, how does it reflect housing prices?" You respond, "It just reflects it; isn’t it in the name? This is HomePriceToken, what’s the problem?" I continue to ask, "What’s the arbitrage mechanism—" and you say, "Stop talking nonsense, this is HomePriceToken."

This discovery is often referred to as "Meme Coins." I often joke about it, but it is indeed an interesting conceptual innovation. The core idea of Meme Coins is: (1) it has a name that associates it with some underlying thing, (2) its trading price is related to the underlying thing, not because of any arbitrage mechanism, but simply because of that name. When people think more about Doge, the price of Dogecoin goes up, that’s it.

This discovery is fascinating because it opens the door to the financialization of various things that typically have no price at all. The value of houses is somewhat traceable—though there are complex issues like liquidity and aggregation—but Meme Coins are not limited to traditional assets. Meme Coins can reflect the popularity of summer hit songs, the popularity of actors, or the health of the U.S. democratic system. It’s not in the predictive market sense—not settled based on some external facts—but simply in the world of Meme Coins. If Democracy Coin goes up, then democracy is improving; if it goes down, then the opposite is true—don’t ask too many questions.

I’m not saying this isn’t absurd; it is indeed absurd, but it’s an interesting kind of absurdity. Here’s a report by Taylor Lorenz on the Meme Coin slang popular among Generation Z:

Every day, 20-year-old college student Boeshi scrolls through social media looking for new words and phrases. He tracks the usage of terms like huzz, soyboy, baddie, and mewing, not just to use in conversations with friends, but also to invest and make money.

As new slang from Generation Z and Generation Alpha continues to gain popularity, a complete financial ecosystem has been quietly taking shape. Young people are putting real money into Meme Coins linked to popular phrases, hoping to profit from their rise.

"The more these silly words are used, the higher the coin price," Boeshi says. "The hotter the word, the hotter the coin."

"Is there an arbitrage mechanism between word usage and coin price?" I interjected, but my brain completely froze, and Boeshi cheerfully ignored my question.

In this emerging attention economy, viral spread equates to monetary value. If a word is trending, the corresponding coin will skyrocket. When the hype fades, the price will drop. "When a word starts to trend, you’ll find it correlates with peaks in Google searches," Boeshi says. "Then the drop is also related to the historical trends of the coin." Currently, there are dozens of popular slang Meme Coins available for trading on the alternative crypto site Pump.fun.

Alright, fine. Huzz. Rizz. Skibidi. Additionally, here’s the complete research paper by Alberto Maria Mongardini and Alessandro Mei on the manipulation of meme coins:

Unlike utility-focused crypto assets like Bitcoin or Ethereum, the value of Meme Coins primarily derives from community sentiment, making them susceptible to manipulation. This study conducted a cross-chain analysis of the Meme Coin ecosystem, examining 34,988 tokens on Ethereum, BNB Smart Chain, Solana, and Base. We described the tokenomics characteristics of Meme Coins and tracked their growth through a three-month longitudinal analysis. We found that among high-yield tokens (>100%), an astonishing 82.6% showed evidence of significant use of artificial growth strategies designed to create a false appearance of market interest. These tactics included wash trading and what we define as liquidity pool-based price inflation (LPI), which involves triggering dramatic price increases through small strategic purchases. We also found evidence of schemes aimed at harming investor interests for personal gain, such as pump-and-dump schemes and exit scams. Notably, most of the involved tokens had previously experienced wash trading or LPI, indicating that early manipulation often paves the way for subsequent exploitation. These findings reveal the prevalence of manipulative behavior in high-performing Meme Coins and suggest that their dramatic price increases are often more likely to stem from coordinated artificial actions rather than natural market dynamics.

Imagine launching one of those 17.4% unmanipulated Meme Coins. It really seems too lazy.

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