Discussion – Crypto Mania and “Bitcoin Treasury” Companies
A strange new phenomenon has come to the fore this year in the wake of the recent excitement and upswing in crypto currency. Much of this upswing has resulted from the current administration’s enthusiasm for crypto, including passing new deregulation legislation, even the Trump family issuing its own meme coins.
A “Bitcoin Treasury Company” is a publicly traded company that uses proceeds from Stock and Bond issuance to buy and hold Bitcoin. Most such companies then make an argument that they are doing things strategically with Bitcoin, such as lending it out or issuing crypto backed loans. Why? So investors can “sell short” Bitcoin for example. And other investors can borrow cash using their Bitcoin as collateral.
Here are a couple articles to explain:
What are Bitcoin Treasury companies anyway?
Charles Schwab: Understanding Bitcoin Treasury companies
Wealth gained hastily will dwindle,
Proverbs 13:11
but whoever gathers little by little will increase it.
So why are we discussing it? When I saw these publicly traded companies appear, my first sense was – Wow! The Crypto market is getting really frothy (overvalued, priced ahead of itself). Turns out I am not alone. Many hedge funds are actively shorting these new digital-asset treasury companies thinking along the same lines.
The Froth
https://www.strategy.com/company ($112Bn market cap)
This “treasury company” phenomenon has carried over into other crypto assets now as well. All of these companies are LEVERAGED plays on crypto. Meaning they borrow money to buy more crypto. Which means the equity can quickly get wiped out in a downturn.
The whole thing reminds me of other publicly traded gimmickry such as “blank check” companies, which have quickly fallen out of favor and way down in price. (Aka SPACs.)
Crypto: Primary Market Drivers
Driver | Examples |
| Fear | FTX failure (worthless) |
| CDBC threats | |
| Stablecoin failures such as Terra-Luna (15 cents) | |
| Shorts | |
| Greed | FOMO (fear of missing out) on 100%+ returns |
| Next coin up (Ethereum) repeating returns of Bitcoin | |
| Trump election crypto lobbying | |
| DOGE coin | |
| Bitcoin Treasury Companies | |
| Bitcoin ETFs | |
| Scarcity | Artificially limited supply to promote ever growing price |
| Mining crypto requires real energy and computing power |
So, when people ask me “should I get into Crypto?” I always caution that the reason there is so much interest is not logical, its pure “animal spirits” as it is sometimes called – which is to say – everyone wants to get rich! But because nothing intrinsic backs the value of Crypto (except for Stablecoins which are a separate class of Crypto in order to bridge into USD banking).
The fact that it is digital and records everything in a decentralized way through “blockchain” tech is interesting, but it doesn’t create value in itself. In fact, when you look at how “mining” has been gamified to “earn bitcoin”, Crypto is not only intrinsically worthless, it also uses tremendous energy and computing power (and expense). This and AI is why Nvidia is one of the most valuable publicly traded companies in the world.
Mentioned on the Call
Proverbs 20:21 – An inheritance gained hastily in the beginning will not be blessed in the end.
Proverbs 28:20 – A faithful man will abound with blessings, but whoever hastens to be rich will not go unpunished.
1 Timothy 9 – But those who desire to be rich fall into temptation, into a snare, into many senseless and harmful desires that plunge people into ruin and destruction.
GameStop Part 2 – Bank for Working Poor
Previous Crypto Discussions
- Crypto Currency
- Bitcoin
- Alternative Currency
- Currencies with Doug Tjaden
- Currency Wars
- CBDCs
- Regional Digital Currencies
- Crypto Implosion
Crypto Alternatives
- Currencies backed by Christian Communities (Storehouse Vision)
- Alternative Currencies
- Currencies with Doug Tjaden
- Breakaway Bridges
Leave a Reply