CGV: The successful promotion of MicroStrategy has brought corporate balance sheets into the era of Programmability.

Original Author: Cynic | CGV FOF

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Introduction: Under the strategic shift of the Trump administration fully embracing crypto assets, the scale of listed companies’ crypto reserves is about to exceed the $100 billion mark. This article systematically sorts out the global corporate crypto reserve landscape, deeply analyzes the capital operation model centered around MicroStrategy, and explores the differentiated paths and potential risks of altcoin reserve companies—this experiment of “digital assetization” led by traditional enterprises is reshaping the future paradigm of corporate financial management.

Global Crypto Reserve Enterprises Panorama

From the distribution of listed companies, U.S. listed companies account for 65.2%, Canada accounts for 16.9%, Hong Kong accounts for 7.9%, and Japan also has a small number of companies holding reserves (3.4%), while other countries’ markets account for 6.7%.

From the perspective of the types of crypto assets held by publicly listed companies, BTC accounts for 78%, with ETH, SOL, XRP, and others being close in proportion, all at levels of 5% - 6%, while companies holding other crypto assets account for the remaining 5%.

From the perspective of the value of cryptocurrency assets held by publicly listed companies, BTC is in an absolute leading position, accounting for 99% of the value, while the remaining assets account for the remaining 1%.

According to the statistical analysis of the time when the company first announced its crypto strategic reserves, the results are shown in the figure below. Note: Only accurate disclosed data is included. From the chart, we can observe significant peaks and valleys, which also coincide with the bullish and bearish cycles of the cryptocurrency market.

Two significant peak periods:

· 2021: 25 companies announced strategic reserves, mainly driven by the increase in Bitcoin prices and the demonstration effect of MicroStrategy.

· 2025: 28 companies, reaching a historical peak, demonstrating an increased acceptance of cryptocurrency as a corporate reserve asset.

Characteristics of the trough period:

· 2022 - 2023: Only 3 companies entered the market, reflecting the impact of the bear market in the crypto sector and regulatory uncertainties.

Recently, more companies have announced their cryptocurrency reserves, and it is expected that the number of publicly listed companies with cryptocurrency reserves will exceed 200 this year, with the adoption of cryptocurrencies in traditional industries continuing to rise.

Strategic Reserves, Capital Operations and Stock Price Performance

From the current capital operation models of various digital asset reserve companies, they can be summarized into the following types:

1. Leverage Coin Storing Model: Businesses with weaker main operations use borrowed funds and financing to purchase crypto assets, aiming to enhance net assets after the crypto assets appreciate, which in turn drives stock prices and further financing, creating a positive feedback loop effect. Essentially, this turns the company’s stock into a leveraged spot on crypto assets. If operated properly, it can leverage small costs to synchronize the rise in stock prices and net assets. Typical cases include: MicroStrategy ($MSTR BTC reserves), SharpLink Gaming ($SBET ETH reserves), DeFi Development Corp ($DFDV SOL reserves), Nano Labs ($NA BNB reserves), Eyenovia ($EYEN HYPE reserves).

2. Cash Management Model: Companies with strong core businesses (not related to cryptocurrency) can invest in high-quality crypto assets to gain investment returns when they have sufficient cash flow. This usually does not have a significant impact on stock prices and may even lead to a decline due to investors’ concerns about neglecting the core business. Typical cases: Tesla ($TSLA BTC reserves), Boyaa Interactive (HK0403 BTC reserves), Meitu (HK1357 BTC + ETH reserves).

3. Business Reserve Model: The company engages in reserve activities directly or indirectly related to its main business in cryptocurrency. For example, the needs of exchange operations, as well as mining companies retaining mined bitcoins as reserves to address potential business risks. Typical cases: Coinbase ($COIN various types of cryptocurrency reserves), Marathon Digital ($MARA BTC reserves).

Among many companies, MicroStrategy flexibly uses leverage, transforming from a long-term loss-making software service provider into a Bitcoin giant with a market value of hundreds of billions. Its operating model is worth in-depth study.

MicroStrategy: A Textbook on Leveraged Operations of Crypto Reserves

Five-Year Thirtyfold Increase: Bitcoin Leverage Agent

Since MicroStrategy announced its Bitcoin strategy reserve in 2020, its stock price has shown a high correlation with the price of Bitcoin, and the volatility is much higher than that of Bitcoin itself, as can be intuitively seen from the chart below. From August 2020 to now, MSTR has increased nearly 30 times, while the price of Bitcoin has only increased 10 times during the same period.

Statistical analysis of the volatility and correlation between Bitcoin and MSTR by month shows that for most of the time, the price correlation between MSTR and Bitcoin is in the range of 0.6 - 0.8, indicating a strong correlation; at the same time, for most of the time, the volatility of MSTR is several times higher than that of Bitcoin. From the results, MSTR can be regarded as a leveraged security for Bitcoin. On the other hand, it also verifies the leveraged property of MSTR in relation to Bitcoin: In June 2025, the implied volatility of MSTR’s 1-month call option is 110%, which is 40 percentage points higher than that of Bitcoin’s spot, indicating that the market assigns it a leverage premium.

Precision capital operation machine

The core of the micro-strategy model is to acquire funds for purchasing Bitcoin at a lower financing cost. As long as the expected return rate of Bitcoin is higher than the actual financing cost, the model can continue to exist.

MicroStrategy has created a capital tools matrix that transforms the volatility of Bitcoin into structured financing advantages. The capital operation employs various financing strategies, forming a self-reinforcing capital cycle. VanEck analysts have described it as a “pioneering experiment combining digital currency economics with traditional corporate finance.”

The core objectives of MicroStrategy’s capital operations are twofold: to control the debt ratio and to increase the number of BTC per Share. Assuming that BTC rises in the long term, achieving these two core objectives will also enhance the value of MicroStrategy’s stock.

For MicroStrategy, there are implicit costs and constraints in collateralized lending, such as insufficient capital efficiency (requiring a 150% over-collateralization rate), uncontrollable liquidation risks, and limited financing scale.

Compared to collateralized lending, financing methods such as convertible bonds and preferred stocks with implied options can further reduce costs and have a smaller impact on the asset-liability structure. Selling ATM common stocks can also quickly and flexibly obtain cash. Preferred stocks, in terms of accounting treatment, are included in equity rather than debt, which can further lower the debt ratio compared to convertible bonds.

This complex matrix of capital tools is favored by professional investors, allowing them to arbitrage the differences in actual volatility, implied volatility, and other components of the options pricing model, which also establishes a loyal buy-side for microstrategy’s financing tools.

By combining the quarterly Bitcoin holdings with liabilities and significant capital operations events, it can be observed that:

By combining various financing tools, MicroStrategy issues convertible bonds and preferred stocks during a bull market when Bitcoin volatility is high and stocks have a positive premium, to expand its Bitcoin holdings. In a bear market, when Bitcoin volatility is low and stocks have a negative premium, it sells common stocks through ATM to prevent excessive leverage from triggering a chain liquidation risk.

During periods of high premiums, convertible bonds and preferred stocks are prioritized for the following possible reasons:

1. Dilution Delay Effect

Directly issuing common stock (ATM) will immediately dilute the equity of existing shareholders. Convertible bonds and preferred stocks, by embedding conversion options, postpone equity dilution to the future.

2. Tax Efficiency Structure

Preferred stock dividends are deductible at 30% of taxable income, reducing the effective cost of an 8% dividend rate on STRK to 5.6%, which is lower than the 7.2% rate of comparable corporate bonds. In contrast, common stock financing does not provide tax deduction benefits.

3. Avoid reflexivity risk

Large-scale ATM is seen as a signal that management believes the stock price is overvalued, which may trigger programmatic selling.

· Debt Ratio * = Total Liabilities ÷ Total Holding BTC Value · mNAV = Market Capitalization ÷ Total Held BTC Value

Due to its unique financing structure, when Bitcoin rises, MSTR increases at a higher rate, and a large amount of debt will be converted into equity. In fact, since MicroStrategy announced its purchase of Bitcoin, MicroStrategy’s total equity has risen from 100M to 256M, an increase of 156%.

Will a large amount of equity issuance dilute shareholders’ rights? From the data, since Q4 2020, MicroStrategy’s equity has increased by 156%, while the stock price has only increased 30 times, meaning shareholders’ rights have not been diluted but rather significantly enhanced. To better represent shareholders’ rights, MicroStrategy proposed the BTC per Share metric, with the goal of capital operations being to continuously increase BTC per Share. As shown in the graph, in the long term, BTC per Share has always been on an upward trend, having increased tenfold from the initial 0.0002 BTC per Share.

Mathematically, when the MSTR stock price has a high positive premium over Bitcoin (mNAV > 1), potential equity dilution financing to purchase Bitcoin can continuously push up BTC per Share. mNAV > 1 means that the BTC purchased with the funds raised per share is greater than the current BTC per Share. Although the original shares are diluted, the value of BTC contained in each diluted share is still increasing.

The Future Projection of MicroStrategy

I believe there are three key factors for the success of the MicroStrategy model: regulatory arbitrage, correct bets on the rise of Bitcoin, and excellent capital operation capabilities. At the same time, risks are also hidden within.

Legal and regulatory changes

1. The rich squeeze of MicroStrategy’s buying power for Bitcoin investment tools: When MicroStrategy first announced its strategic reserve in Bitcoin, the Bitcoin spot ETF had not yet been approved, and many investment institutions could not directly obtain Bitcoin risk exposure within a compliance framework. Therefore, they purchased through MicroStrategy as a proxy asset. After Trump took office, the government strongly promoted cryptocurrencies, and a large number of compliant crypto-related investment tools have emerged, gradually narrowing the space for regulatory arbitrage.

2. SEC restricts excessive leverage on “non-productive assets”: Although MicroStrategy maintains a controllable debt ratio through meticulous debt management, its current debt rate is significantly lower than that of many publicly listed companies of comparable market value. However, the debt of publicly listed companies is usually used for business expansion, while MicroStrategy’s debt is entirely used for investment, which may be reclassified by the SEC as an investment company, raising its capital adequacy requirement by over 30%, thus compressing leverage space.

3. Capital Gains Tax: If unrealized capital gains held by the company are taxed, MicroStrategy will face significant cash tax pressure. (Currently, the OBBB Act stipulates that taxes are only imposed upon sale).

Bitcoin market dependence risk

1. Volatility Amplifier: MicroStrategy currently holds 2.84% of the total Bitcoin supply. When Bitcoin’s volatility increases, MicroStrategy’s stock price volatility will also multiply several times compared to Bitcoin’s volatility, resulting in significant pressure on the stock price during down cycles.

2. Irrational Premium: MicroStrategy’s market capitalization has been at a premium of over 70% to its net value of Bitcoin for a long time, with most of this premium coming from the market’s irrational expectations of Bitcoin’s rise.

The Ponzi scheme structure risk of debt leverage

1. The cycle of convertible bond financing relies on: “borrow new debt → purchase BTC → drive up stock price → issue new bonds again” which has dual Ponzi characteristics. When large bonds mature, if the price of Bitcoin does not continue to rise to support the stock price, the issuance of new bonds will be hindered, triggering a liquidity crisis (debt rollover risk); if the BTC price falls, causing the stock price to drop below the convertible bond conversion threshold, the company will be forced to repay in cash (conversion price inversion).

2. Lack of stable cash flow: Due to the company’s lack of a stable cash flow source and its inability to sell Bitcoin, MicroStrategy’s means of repaying debt is primarily through issuing additional shares (debt-to-equity conversion, ATM). When the stock price or Bitcoin price declines, the cost of financing increases significantly, which may lead to the risk of financing channels being closed or substantial dilution, making it difficult to continuously increase holdings or maintain operational cash flow.

In the long run, when entering a downturn cycle of risk assets, multiple risks overlapping may trigger a chain reaction, forming a technical risk transmission mechanism that leads to a death spiral:

Another possibility is regulatory intervention, converting MicroStrategy into a Bitcoin ETF or similar financial products. MicroStrategy currently holds 2.88% of the total BTC, and if it really gets caught in a sell-off liquidation wave, it could directly lead to the collapse of the cryptocurrency market, while converting to an ETF type would be much safer. Although MicroStrategy holds a large amount of Bitcoin, it is not particularly outstanding when compared to ETFs. Additionally, on July 2, 2025, the SEC approved the conversion of the Grayscale Digital Large Cap Fund into an ETF that holds a portfolio of assets such as BTC, ETH, XRP, SOL, ADA, which indirectly indicates the possibility.

Altcoin Reserve Experiment: Taking $SBET and $DFDV as examples

Valuation Reversion Analysis: From Sentiment-Driven to Fundamental Pricing

The volatility path and stabilization signal of $SBET

Causes of price surges and drops:

In May 2025, $SBET announced a $425 million PIPE financing to acquire 176,271 ETH (worth $463 million at the time), becoming the world’s largest publicly traded holder of ETH, with its stock price soaring 400% in a single day. Subsequently, SEC filings showed that PIPE investors could resell their shares, triggering panic selling in the market over dilution, causing the stock price to plummet 70%. Ethereum co-founder Joseph Lubin (chairman of the $SBET board) clarified “no shareholder sell-off,” but market sentiment had already been dampened.

Signs of valuation repair:

As of July 2025, the $SBET stock price stabilized around $10, with an mNAV of approximately 1.2 (after accounting for the PIPE issuance, it is about 2.67).

The stabilization power comes from:

1. ETH Position Appreciation: An additional purchase of $30.6 million for 12,207 ETH, bringing the total position to 188,478 ETH (approximately $470 million), accounting for 80% of the market value;

2. Staking income realization: Through liquid staking derivatives (LSD), a total income of 120 ETH has been obtained;

3. Improvement in liquidity: Average daily trading volume of 12.6 million shares, short ratio decreased to 8.53%.

$DFDV’s ecological integration premium

Compared to $SBET, although the volatility of $DFDV is also very high, the support for its stock price decline is relatively stronger. Despite experiencing a single-day drop of 36%, $DFDV still has a 30-fold stock price gain compared to before its transformation. This is partly due to the company’s low market value before the transformation, and partly due to its business diversity, especially the investment in infrastructure, which provides more valuation support.

Valuation support for SOL reserves:

$DFDV holds 621,313 SOL (approximately $107 million), with three sources of income:

1. SOL price appreciation (accounting for 90% of position value);

2. Staking rewards (annualized 5% - 7%);

3. Validator commission (charged to eco-projects such as $BONK).

PoW vs. PoS: The Impact of Staking Rewards

The annualized yield from native staking of POS cryptocurrencies such as ETH and SOL may not directly impact valuation models, but circulating staking is expected to enhance the flexibility of capital operations.

1. Bitcoin, as a POW token, does not have an interest-bearing mechanism, but its total supply is fixed, and the inflation rate continues to decline (currently at 1.8%), which gives the asset scarcity. PoS tokens can earn rewards through staking, and when the staking reward rate is higher than the token’s inflation rate, the staked assets gain nominal appreciation. Currently, SOL staking annualized returns are 7% - 13%, with an inflation rate of 5%; ETH staking annualized returns are 3% - 5%, with an inflation rate of less than 1%. Current ETH/SOL staking can generate additional returns, but it is important to pay attention to changes in the inflation rate and staking returns.

2. The earnings generated from staking are denominated in the cryptocurrency itself and cannot be converted into purchasing power in the secondary market to further drive up the coin’s price.

Liquid staking not only allows for earning staking rewards but also enables the use of liquid assets for DeFi activities, such as collateralized lending, thereby enhancing the flexibility of capital operations. (For example, DFDV has issued its own liquid asset DFDVSOL.)

The success factor of $MSTR in the applicability verification of altcoin reserve companies.

Regulatory arbitrage: space narrowing

Recently, the approval speed of ETF applications has明显加快, with multiple institutions applying for different cryptocurrency ETFs, and approval is just a matter of time. Before more complex financial instruments related to specific cryptocurrencies appear, the stocks and bonds of altcoin reserve companies can still meet the needs of some investors, but the space for regulatory arbitrage is gradually shrinking.

Token price increase bets: The future performance of altcoins is uncertain.

Bitcoin, as “digital gold,” has a global liquidity consensus, while ETH/SOL lacks the same status. BTC has the attributes of a reserve asset, but ETH/SOL is mostly regarded as a utility asset.

During the period of 2024 - 2025, altcoins perform poorly compared to Bitcoin:

The dominance of Bitcoin continues to rise in 2024, reaching a high of around 65%.

· Historically, altcoin seasons usually start after Bitcoin reaches its peak, but in this cycle, altcoins have lagged.

At the time of this round’s Bitcoin all-time high, ETH and SOL were still less than 50% of their historical highs.

Capital operation capability: upgraded flexibility

Compared to the strategic reserves of Bitcoin, the strategic reserve companies of altcoins can participate more deeply in the cash income generated by public chain ecological businesses, while also improving capital utilization through DeFi.

For example:

1. $SBET is chaired by the founder of Consensys, and is expected to expand cash flow businesses such as wallets, public chains, and staking services in the future;

2. $DFDV cooperated with Solana’s largest meme coin $BONK to acquire the validator network, with commission income accounting for 34% of Q2 revenue;

3. $DFDV packages staking rewards into DeFi tradable assets through dfdvSOL, attracting on-chain capital;

4. $HYPD (formerly Eyenovia $EYEN) will use the reserved $HYPE for staking, lending, and expanding node operations and referral commission business;

5. $BTCS (Ethereum node and staking service provider) will use $ETH for staking and obtain low-cost funds through AAVE with LST and BTC as collateral.

In summary, the narrowing of regulatory arbitrage space and the uncertainty of token price increases will compel altcoin reserve companies to innovate their operational models, deeply engage in on-chain ecosystems, and build cash flow through ecosystem businesses to enhance their risk resistance capabilities.

As MicroStrategy transforms Bitcoin into “volatility leverage” using sophisticated capital tools, altcoin reserve companies are attempting to solve valuation dilemmas through DeFi operations. However, the shrinking of regulatory arbitrage windows, differences in token consensus strength, and inflation concerns of the POS mechanism keep this experiment full of uncertainties. It is foreseeable that as more traditional enterprises enter the market, the strategic reserves of crypto assets will shift from aggressive bets to rational allocations—its ultimate significance may not lie in short-term arbitrage, but in driving corporate balance sheets into the programmable era.

As Michael Saylor said: “We are not buying Bitcoin, we are building a financial system for the digital age.” The ultimate test of this experiment will be whether the balance sheet can withstand the dual pressure when Bitcoin enters a bear market - this is also a question that traditional companies must answer before entering the market.

Note: This article is a CGV research report and does not constitute any investment advice, it is for reference only.