0:02 Earlier this year, a littleknown British
0:05 web design firm called Smarter Web
0:08 Company saw its market value explode
0:11 from £4 million to over a billion pounds
0:15 in just 2 months. The reason? Well, they
0:17 announced that they would start buying
0:19 Bitcoin. Now, I know what you're
0:22 thinking. 4 million to a billion,
0:24 Bitcoin hasn't gone up that much, has
0:27 it? Well, that's not how this works.
0:30 Smarter Web is not alone. All around the
0:32 world, a growing number of companies,
0:34 many with no prior connection to
0:36 cryptocurrencies, have started
0:39 transforming themselves into what people
0:42 are calling Bitcoin treasury companies.
0:45 Some are issuing debt and others hybrid
0:47 securities to fund their crypto
0:49 purchases. What began as a crazy
0:52 experiment by Micro Strategy, a US
0:55 software firm, has now gone global as
0:57 businesses seem to hope that buying
1:00 Bitcoin will spike their stock prices
1:02 like it did for Micro Strategy, whose
1:05 core software business generates tiny
1:08 revenues and operates at a loss. But its
1:10 aggressive Bitcoin purchases have turned
1:14 it into a $100 billion company. Micro
1:16 Strategy, I should note, recently
1:20 changed its name from Micro Strategy to
1:22 Strategy. I guess the initial name
1:24 suggested that they had a very small
1:27 strategy and getting rid of the micro in
1:30 the company name possibly implies a new
1:32 confidence in what they're doing.
1:34 Strategy is in the business of running
1:37 an unprofitable software company and
1:40 owning a big pile of bitcoins. Because a
1:42 lot of investors are not very good at
1:44 math, strategy worked out that they
1:46 could sell their stock at a large
1:48 premium to the value of the bitcoins
1:51 that they own and then use that money
1:54 that they raised by selling stock to buy
1:56 even more bitcoins, pushing the bitcoin
1:59 price higher and their stock price
2:02 higher, too. an infinite money glitch.
2:04 If anyone ever tries to lecture you on
2:07 the efficient markets hypothesis, do ask
2:10 them to explain this dynamic to you. And
2:12 if they have a really good explanation,
2:14 tell me because I'm struggling a bit
2:17 with this one. Before discovering that
2:20 stock investors will pay roughly $2 for
2:22 a dollar's worth of Bitcoin, Micro
2:25 Strategy described itself as a business
2:28 intelligence and software company,
2:31 specializing in data analytics. It went
2:34 public in 1998 during the dotcom boom
2:36 and the company's stock price initially
2:40 soared. In March 2000, just as the
2:42 dotcom bubble was bursting, Micro
2:44 Strategy was forced to restate its
2:46 financial results for the previous two
2:49 years or its entire history as a public
2:52 company due to accounting irregularities.
2:54 irregularities.
2:56 This triggered a stock price collapse
2:58 and marked one of the first major
3:01 corporate scandals of the dot crash. The
3:04 SEC accused the company founder along
3:07 with two other company officials of
3:09 committing fraud by reporting profits
3:11 when the company was actually losing
3:15 money, which you're not supposed to do.
3:18 That was 25 years ago, though, and not
3:20 everyone is great at accounting. Other
3:23 than his recent $40 million settlement
3:25 for committing what the DC Attorney
3:28 General described as the largest income
3:30 tax fraud in Washington history, the
3:33 CEO, Michael Sailor, has mostly kept out
3:36 of trouble. As Matt Lavine has pointed
3:38 out, the breakthrough that stock
3:41 investors will pay $2 for a dollar's
3:43 worth of Bitcoin is a financial
3:46 perpetual motion machine. And once it's
3:48 been discovered, other people start to
3:50 notice. And because you probably can't
3:52 patent it, other companies are
3:55 guaranteed to copy the idea. They pivot
3:57 from being web design companies,
3:59 Japanese hotel chains, or whatever
4:01 nonsense they've been wasting their time
4:04 on to accumulating piles of Bitcoin and
4:06 selling stock at a premium to the value
4:09 of that pile so that they can buy even
4:13 more Bitcoin. In the past year alone,
4:15 the number of listed companies holding
4:19 Bitcoin has surged by nearly 170% with
4:22 more than 130 firms now collectively
4:26 owning over 800,000 bitcoins. This is
4:29 more than 3% of the total supply. These
4:32 companies span industries as diverse as
4:35 web design, mining, healthcare, video
4:38 game retail, and media. and they're
4:40 united by a common belief that Bitcoin
4:43 is not just a digital asset, but a
4:45 strategic reserve capable of unlocking
4:48 investor enthusiasm, capital market
4:50 access, and exponential share price
4:54 growth. Before we go any further, let me
4:56 quickly tell you about this week's video
4:59 sponsor, Plaude Node, an amazing AI
5:01 powered notetaking device that I've been
5:04 using for the last month. The plot node
5:06 is about the size of a credit card. And
5:08 if I have an idea for a video while out
5:10 walking, I can just hit the record
5:13 button and record the idea. It's way
5:15 faster than typing. And I often find
5:17 that I can describe my idea better
5:19 verbally than by typing it into my phone
5:22 or computer. As soon as you stop, the
5:25 recording is uploaded to your phone and
5:27 it returns a transcription and summary
5:30 in seconds. You can even ask the AI to
5:33 extract key points, generate to-do
5:35 lists, or clarify anything you didn't
5:37 quite catch. It's like having a smart
5:40 assistant working with your notes. It's
5:43 really useful in meetings and classes as
5:46 it takes notes for you so that you can
5:48 pay attention and engage with people
5:50 rather than scribbling furiously in a
5:53 notepad. It even clips to the back of
5:55 your phone if you need to record,
5:57 transcribe, and summarize important
6:00 phone calls. The plot node automatically
6:02 recognizes when different people are
6:04 speaking so that its summaries make
6:07 sense, and it cuts out the small talk,
6:10 creating useful meeting notes and agreed
6:12 upon action items. Any role that
6:14 involves regular reporting or
6:17 communications to colleagues will find
6:20 this a huge timesaver. Your Salesforce
6:23 reports are done in seconds. Plaud
6:26 running a sale right now. Use the QR
6:28 code on screen or the link in the
6:31 description to get one right now. The
6:32 recent excitement around
6:35 cryptocurrencies isn't just a corporate
6:37 trend. It seems to be a cultural and
6:40 political moment, too, especially in the
6:42 United States where the president and
6:45 his wife have both launched extremely
6:48 successful meme coins. successful for
6:50 them, at least not the people who bought
6:52 them. Obviously, the Trump
6:54 administration appears to have embraced
6:57 crypto as a pillar of its economic
7:00 agenda, with Vice President J. D. Vance
7:02 declaring at a recent Las Vegas
7:04 conference that we want our fellow
7:07 Americans to know that crypto and
7:10 digital assets and particularly Bitcoin
7:12 are part of the mainstream economy and
7:15 are here to stay. President Trump has
7:17 already overseen a loosening of the
7:19 federal government's approach to
7:21 regulation of cryptocurrencies.
7:24 The SEC has dropped, paused, or reached
7:27 agreements in more than a dozen cases
7:29 and investigations, and the Department
7:31 of Justice disbanded its crypto
7:35 enforcement team. The FT reported back
7:37 in May that the legal and political
7:40 changes that caused Bitcoin prices to
7:43 spike also sparked a rush to list crypto
7:45 treasury companies who offered to sell
7:48 shares and debt in order to finance the
7:51 accumulation of large crypto reserves.
7:53 That month, the media company run by
7:56 President Trump's family confirmed plans
8:00 to raise $2.5 billion to buy up crypto.
8:04 21 Capital, a business run by Jack Mers,
8:06 who was influential in making Bitcoin
8:09 legal tender in El Salvador, struck a
8:12 deal with Caner Equity Partners, headed
8:15 up by Brandon Lutnik, the son of
8:17 Commerce Secretary Howard Lutnik, and
8:20 backed by Soft Bank and the stable coin
8:22 operator Tether to buy billions of
8:25 dollars of Bitcoin. These are some of
8:27 the most respected names in the crypto
8:30 industry. the US politician and the
8:32 first person to have been laid off by
8:35 Doge, Vivec Ramaswarmi's asset
8:38 management firm Strive and American
8:40 Bitcoin, a crypto miner part owned by
8:43 President Trump's sons announced a
8:45 merger giving their Bitcoin acquisition
8:48 vehicles access to a stock market
8:51 listing and with it the opportunity to
8:54 raise further funds. Strive announced
8:57 that it planned to raise as much as $1.5
9:00 billion dollars to support a first wave
9:02 of Bitcoin acquisitions.
9:06 A spa Yeah. Um, spaxs are back too
9:10 called Nakamoto Holdings merged with an
9:12 opioid healthc care group called Kindly
9:15 MD to set up a corporate Bitcoin
9:18 treasury. The CEO of the firm said that
9:21 it was packaging Bitcoin into various
9:24 forms to attract buyers from other
9:27 markets. A Japanese hotel developer
9:29 called Metaplanet saw its share price
9:32 rocket after announcing plans to raise
9:35 about $5.4 billion to add to its
9:38 stockpile of Bitcoin. Tesla, who first
9:42 bought $1.5 billion worth of Bitcoin in
9:45 2021 when it claimed that it would soon
9:48 accept payments in the cryptocurrency,
9:51 then sold 75% of the position a year
9:54 later. But the robo taxi manufacturer
9:56 has once again become a significant
10:00 Bitcoin holder. Tesla reported a $600
10:03 million boost in its earnings last year
10:05 due to a change in accounting rules
10:07 where it recognized the rise in the
10:10 price of its crypto holdings. In the
10:12 following quarter, Tesla decided to
10:16 exclude a $97 million cryptoreated loss
10:18 and a much larger expense tied to
10:21 stock-based compensation. I guess it's
10:23 always hard to know if you should
10:26 include or exclude items like this.
10:29 Block, a company co-founded by former
10:31 Twitter CEO and beard enthusiast Jack
10:34 Dorsey, first started buying Bitcoin 5
10:37 years ago and last year set out to
10:41 invest 10% of its monthly gross profits
10:43 from its Bitcoin products back into
10:47 Bitcoin as an investment. A Chinese AI
10:50 software company called Next Technology
10:52 Holding, which was once known as We
10:55 Trade Group, great name, was about to be
10:58 delisted by NASDAQ because its stock
11:00 price had declined so much. It managed
11:03 to use the Micro Strategy Infinite Money
11:06 Glitch to boost its stock price and
11:09 remain listed after it issued shares and
11:12 warrants to buy Bitcoin.
11:15 Even GameStop, the video games retailer,
11:17 announced that it had started buying
11:19 Bitcoin, which surprisingly caused the
11:23 stock price to fall 10%. I think this is
11:25 because GameStop investors feel that the
11:27 company's focus should stay on the
11:30 extremely profitable business of selling
11:33 video games, Pokemon cards, and NFTTS at
11:35 mall-based locations across the United
11:38 States and not get distracted by other
11:40 business lines. I'm reliably told that
11:43 these are great businesses to be in.
11:45 Now, even London, long seen as a
11:48 cautious observer of the cryptocurrency
11:51 boom, has piled in and joined the fry as
11:53 a wave of small cap British firms have
11:56 become Bitcoin treasury companies,
11:58 hoping to ride the same wave that has
12:00 lifted their American and Asian
12:02 counterparts. According to the FT, at
12:06 least nine UK listed companies in the
12:08 final week of June alone announced that
12:10 they have either bought Bitcoin to add
12:13 to their corporate treasuries or that
12:15 they plan to do so. The firms ranging
12:18 from AI startups to gold miners are
12:21 embracing the cryptocurrency not for its
12:24 technological promise, but for its
12:26 potential to ignite investor interest
12:29 and turbocharge share prices. Now, you
12:31 might think that Michael Sailor, who
12:34 first came up with the Bitcoin perpetual
12:37 money machine company idea, would be
12:39 upset that other people are copying his
12:42 strategy or micro strategy. But he
12:45 doesn't appear to be. In fact, he's
12:47 pitching that big companies like
12:49 Microsoft should buy Bitcoin instead of
12:51 buying back their own shares, which he
12:55 describes as legacy capital strategy.
12:58 The thing is, Michael Sailor owns
13:00 bitcoins and he probably doesn't own
13:02 Microsoft stock. It's of no benefit to
13:04 him if they pay a dividend or reduce
13:07 their share count, but it would help him
13:09 out quite a bit if other companies were
13:12 to buy up the illquid asset that he owns
13:14 as that would push the price higher and
13:18 higher. According to the FT, most of the
13:20 UK listed businesses that are buying up
13:23 Bitcoin to boost their stock prices are
13:25 small loss-making companies that have
13:28 tiny trading volumes and see Bitcoin as
13:31 the solution to trigger explosive share
13:33 price growth. Many are listed on the
13:36 Micro Cap Aquis exchange, although a few
13:38 are listed on London's main stock
13:40 exchange. Now, before you start making
13:43 fun of these companies, I should let you
13:45 know that many of their stocks are up
13:48 400% since making these announcements.
13:51 Metaplanet, the Japanese hotel company
13:54 whose CEO converted from hotel year to
13:57 hodler, is up almost 600% over the last
14:00 year. Why would you waste your time
14:02 cleaning bedrooms and hauling people's
14:04 suitcases up a stairs when you could
14:07 just buy some crypto? In a year when
14:09 most businesses are worried about being
14:11 hit by tariffs, it possibly makes sense
14:14 to drop all other business activities
14:16 and just buy crypto. All of the other
14:18 stuff, as Michael Sailor would point
14:22 out, is unnecessary. These are legacy
14:24 business activities. For many of the
14:27 firms that have made this discovery,
14:30 Bitcoin is not just a treasury asset.
14:32 It's a lifeline. Bluebird Mining
14:34 Ventures, which had been struggling with
14:37 project delays and financial losses,
14:40 credited Bitcoin strategy with reviving
14:42 shareholder interest and securing new
14:46 funding. Similarly, Binance, a former
14:49 mining operation, is rebranding as the
14:53 London BTC company, positioning itself
14:55 as a regulated gateway to Bitcoin
14:58 exposure rather than whatever it was
15:01 before. It may be somewhat
15:03 understandable that British investors
15:05 are buying these stocks as the British
15:07 financial regulators have banned retail
15:09 investors from buying exchangeraded
15:12 products linked to cryptocurrencies and
15:15 other types of madeup money. Bitcoin
15:18 treasury companies allow British equity
15:20 investors to get exposure to an asset
15:23 class that many see as being complex and
15:25 difficult to hold. It's not obvious to
15:28 me why they would pay a huge premium to
15:32 do this, but they will, and they do.
15:34 It's much more confusing that American
15:37 investors will pay up to own a company
15:40 that owns Bitcoin when Bitcoin ETFs
15:43 already exist. Convertible bonds have
15:45 been another way for Micro Strategy to
15:48 raise money. Convertible bonds usually
15:50 pay a fixed interest rate, which is a
15:53 bit lower than regular bonds pay, but
15:55 they can be converted into shares at an
15:58 agreed price, allowing investors to
16:00 benefit from equities unlimited upside
16:03 while providing the perceived downside
16:06 protection of owning bonds. The fact
16:09 that Micro Strategy stock is extremely
16:11 volatile, in fact, it's more volatile
16:14 than the underlying Bitcoin means that
16:16 the company can issue bonds with a
16:19 higher conversion premium than usual and
16:22 even offer zero interest on the debt.
16:24 Investors in these bonds have been
16:26 attracted by the huge potential upside
16:29 of the company's stock price and the
16:31 perceived downside protection of owning
16:34 bonds. Matt Lavine at Bloomberg points
16:37 out that one group of investors, the
16:39 convertible bond holders, is benefiting
16:42 from this volatility and another group
16:44 is being harmed by it as there are a
16:47 large number of investors buying levered
16:50 strategy ETFs which are to a certain
16:53 extent a bet against volatility. This is
16:55 because the more volatile the underlying
16:59 stock is, the worse a leveraged ETF does
17:02 at tracking its returns. The fact that
17:04 convertible bond investors typically
17:06 hedge their equity exposure through a
17:09 dynamic hedging strategy where they buy
17:11 low and sell high would mean that the
17:14 more convertibles that are outstanding,
17:16 the more that this hedging activity
17:18 would be expected to mute the volatility
17:20 of the stock. The fact that leveraged
17:23 ETF buyers do the opposite means that
17:26 they're amping up the volatility. So the
17:29 levered ETF buyers are offsetting the
17:31 volatility damping effects of the
17:34 convertible bond arbitrage investors.
17:37 The rise of Bitcoin treasury companies
17:39 marks a shift in how some companies
17:42 think about capital risk and investor
17:44 engagement. As what began as a slightly
17:47 mad experiment by a single US software
17:50 firm now appears to have gone global
17:52 with more than 130 listed companies
17:55 holding over 3% of the world's Bitcoin
17:58 supply. From Tokyo to London, businesses
18:01 are leveraging into cryptocurrency not
18:04 just as a hedge or an investment, but as
18:07 a strategic tool to access capital
18:10 markets, revive flagging share prices,
18:12 and rebrand themselves for a new
18:16 financial era. This strategy is not
18:18 without its perils. Bitcoin treasuries
18:20 are yet to be tested by a prolonged
18:23 downturn in cryptocurrency prices, which
18:25 could leave them struggling to repay
18:27 debt that they've taken on to build up
18:30 their stock piles. For those who believe
18:32 in the future of Bitcoin, all of this
18:35 makes sense. Companies that leverage up
18:38 to buy crypto will earn higher returns
18:40 as we drift towards the point where
18:42 Bitcoin replaces the dollar as the
18:46 global reserve currency. Most investors
18:48 possibly still prefer to own real assets
18:51 that generate cash flows and see this as
18:54 a risky bet on an asset of questionable
18:57 future value. The governance dimension
18:59 of this corporate strategy can't be
19:01 ignored either. Obviously, not all
19:04 shareholders are aligned with the vision
19:06 of turning operating companies into
19:09 crypto funds. The fact that it's boosted
19:11 stock prices so far means that these
19:14 investors can just sell their shares and
19:16 walk away with a profit. But as more
19:19 firms adopt this strategy, boards will
19:21 face growing pressure to justify the
19:24 risks and will possibly have to explain
19:27 themselves when the strategy blows up.
19:30 It's always somewhat entertaining to see
19:33 how crypto reshapes itself over time.
19:35 Bitcoin was originally created in
19:37 response to the global financial crisis
19:40 of 2008 and the loss of trust in
19:42 traditional centralized financial
19:45 systems that occurred at that time. It
19:48 was seen as a response to the perceived
19:51 flaws of centralized finance offering a
19:54 decentralized transparent and user
19:56 controlled alternative for financial
19:58 transactions. When the price started
20:01 running up, it was no longer a currency.
20:03 You wouldn't use it to buy things. It
20:06 was now an appreciating asset. Later, it
20:09 was pitched as digital gold, but it
20:11 failed on that front as it fell in value
20:13 when inflation kicked in after the
20:16 pandemic. Now, Bitcoin investors are
20:18 trying to encourage central banks and
20:21 companies to buy Bitcoin, which seems
20:23 like the opposite of the original
20:26 intention. This new idea of crypto is
20:29 something that an investor gets exposure
20:32 through by buying a locally listed stock
20:35 at a huge premium to NAV which is
20:37 conveniently denominated in their local
20:39 currency is more than a little bit
20:42 confusing. Like I said, if it makes
20:45 sense to you, feel free to explain it to
20:47 me in the comment section below. If you
20:49 enjoyed this video, you should watch my
20:52 video on Argentina's memecoin disaster
20:54 next. Don't forget to check out our
20:57 sponsor, Plot Node, using the link in
20:59 the description. See you in the next
21:02 video. Bye. [Music]
Chrome Extension