Bitcoin has just broken its all-time high, and
it’s no wonder. Spot Bitcoin ETFs have served as rocket fuel for BTC’s price. Countries are adding
it to their national reserves, and more companies than ever are holding BTC on their balance sheets.
However, while it seems like Bitcoin is going from strength to strength, many have questioned whether
this concentrated accumulation of BTC is good for Bitcoin or whether it poses new threats. It’s
a threat. A threat. A recent article by one of crypto’s sharpest minds tackles this head
on. So, today we’re breaking this article down in simple terms and exploring what could be next
for Bitcoin. My name is Nick and you’re watching the Coin Bureau. Now, before we begin, you need to
know that I am not a financial adviser and nothing in this video should be considered financial or
investment advice. This is purely educational content delivered to you with that classic Coin
Bureau charm. So, if that sounds good to you, article we’ll be summarizing today is titled quote
the rise of Bitcoin stocks and bonds which was written by Lynn Alden, a widely respected voice in
macro and crypto. We’ve linked to the full article in the description below and highly recommend
giving it a read when you have the time. Now, the article begins by saying that although Michael
Sailor’s strategy first adopted Bitcoin in 2020, broader corporate adoption was initially slow.
Today, this is changing in a big way, and the companies that embraced Bitcoin at scale early
on have since seen their market caps and stock prices explode. Olden then answers the obvious
question of why investors would invest in a company holding BTC rather than BTC directly. And
the first reason is that many portfolio managers may be bullish on Bitcoin but are restricted to
working to a specific mandate. So for example, a stock portfolio manager can only invest in
stocks. However, if a company holds Bitcoin, the stock portfolio manager can gain exposure
to BTC’s price action by investing in a Bitcoin treasury company. A clear example is Strategy’s
MSTR, which has surged since the firm first bought Bitcoin. And because it’s a much smaller
market cap, MSTR has often outperformed Bitcoin’s price action itself. The second reason is that
companies with strong conviction in Bitcoin often use leverage to accumulate more Bitcoin.
As she explains, quote, “Publicly traded operating corporations have access to better
types of leverage than hedge funds and most other types of capital. Specifically, they have
the ability to issue corporate bonds. Put simply, corporations can borrow money for asset purchases,
aiming to boost their returns. But if asset prices fall too far, they risk a margin call, which
is an urgent demand to pay part of the loan, which can of course force them to sell at a loss.
Even if they strongly believe in that asset, it’s not ideal. The good news is that this setup
means corporations can issue long-term bonds to raise capital without selling their Bitcoin.
So, if BTC’s price drops, they’re under less pressure to sell at a loss. Essentially, since
they aren’t dependent on short-term loans tied to Bitcoin’s value, they’re better equipped
to ride out Bitcoin’s volatility. Notably, Alden points out that over the long term,
corporate bond leverage is often superior to leveraged ETFs. And that’s because leveraged ETFs
rely on short-term leverage that resets daily, which drags down performance, often causing them
to significantly underperform their non-leveraged counterparts. However, assets with longer duration
leverage attached typically don’t have the same troubles. It’s quite the opposite actually. When
BTC is appreciating and has multi-year duration debt attached to it, this can be a powerful
combination for Bitcoin treasury companies to maximize their returns. Alden adds that
quote, “Not everyone should take on leverage, but those who do will naturally want to do it in
the most optimal way. And as luck would have it, there are now lots of Bitcoin Treasury companies,
each with varying risk profiles, volatility, and jurisdictions. And this range provides investors
with ways to get the type of volatility exposure that suits them. The next section of Lyn Alden’s
article explores whether corporations support or undermine Bitcoin’s mission. Answering this hinges
on two points. The steps decentralized money must take to gain adoption and whether corporations
help or hinder that process. To help answer this, Alden cites a 2010 quote from Satashi Nakamoto
on the Bitcoin Talk forum. Quote, “As a thought experiment, imagine there was a base metal as
scarce as gold, but with the following properties. boring gray in color, not a good conductor
of electricity, not particularly strong, but not ductile or easily malleable either, not
useful for any practical or ornamental purpose, and one special magical property, can be
transported over a communications channel. If it is somehow acquired any value at all for whatever
reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it,
and have the recipient sell it.” End quote. Alvin explains that while Bitcoin found early success,
it soon faced unexpected disruption from altcoins, and these revealed that despite Bitcoin’s unique
strengths, there are infinite ways to transfer money on chain. And the launch of stable coins
in 2014 intensified this competition by enabling value transfers without the volatility. And that
actually reminds me, if you’re looking to buy or Elder notes that over time it became obvious that
as more people held BTC, the easier it was to use. That’s because Bitcoin’s network effect had helped
it self-reinforce as money. In this sense, Alden identifies two types of money that Bitcoin could
have become. situational money and ubiquitous money. In a nutshell, situational money solves
specific problems uh like crossber transfers or bypassing restrictions. It’s useful in certain
contexts but doesn’t ensure broad or lasting adoption. Conversely, ubiquitous money is widely
accepted within a region or industry and held as a cash balance rather than immediately sold or
exchanged. Crucially, people see it as a reliable store of value and seek to accumulate more of it.
Investors typically buy it expecting appreciation, so they don’t need convincing to accept it as
a payment method either. Alden then highlights Bitcoin’s major success as a sound portable store
of value that holders can spend or exchange. And this is thanks to its architecture, its
proofof work consensus mechanism, fixed supply, simplicity, decentralization, and first mover
advantage are all key factors that have earned its reputation as sound money. But here’s where
things get interesting. Alton explains that Bitcoin sits in the gray area between situational
money and ubiquitous money. That’s because unlike situational money, many people will hold Bitcoin
long-term, but it’s also unlike ubiquitous money since it’s not yet widely accepted. She adds
that quote the reason it takes a long time to go through that stage is due to volatility and due to
the sheer size of the existing network effect it is up against that people have their expenses and
liabilities denominated in. And this ties into how far we are into Bitcoin’s adoption phase. Elden’s
article notes that while BTC’s price continues to fluctuate by large swings at a time, Bitcoin
remains a flawed form of nearterm money. She gives the example of paying rent where neither the
tenant nor the landlord can really afford Bitcoin to drop by 20% in a month. As such, Bitcoin
is mainly viewed as an investment. Hardcore enthusiasts and those without access to cash are
more likely to use Bitcoin for payments, though the latter would probably prefer stable coins.
As the article notes, centralization matters less if the stable coins are only used shortterm.
Elden adds that while some enthusiasts encourage holders to spend their BTC, this practice isn’t
sustainable. Now, for Bitcoin to handle trillions of dollars in medium of exchange transactions, it
would need to solve challenges. other solutions currently already address, which isn’t the case
at this stage of Bitcoin’s adoption. As such, Alden advises enthusiasts to keep educating others
while managing expectations, acknowledging that broader economic factors mean change won’t happen
overnight. And this highlights the importance of optionality, the ability to store BTC portably and
convert it to other currencies whenever needed. In this sense, Bitcoin was already successful,
especially compared to other currencies. While the US dollar, euro, and assets like gold and
silver are widely accepted and easily converted, most others are far less usable. Among the top
10 global currencies, Alden ranks Bitcoin between fifth and 10th, which is not really bad for a
currency still in its teens. Alden then answers other frequently asked questions starting with
whether Bitcoin’s users are still using it as a money if they’re not transacting with it. Uh to
which she answers yes and that’s because simply holding Bitcoin technically counts as using
it. While it may not be ubiquitous money, it functions as situational money and portable
capital. The next question asks when Bitcoin’s usage will take off as a medium of exchange.
Alden answers this by saying, quote, “Likely not until it’s an order of magnitude larger and less
volatile. BTC currently only makes up roughly 0.2% of global assets and is incredibly volatile. Since
ubiquitous money is typically held, store of value use usually comes before medium of exchange use.
Alder notes that stable coins are better suited as cryptos medium of exchange. The catch is that most
are centralized, making them subject to control, censorship, and even confiscation. And this ties
into the next question, which asks whether Bitcoin is too volatile to be money. Alden answers yes and
no. Bitcoin itself isn’t inherently volatile. Its qualities are sound and persistent. The volatility
comes from the people who adopt and explore it. While upward volatility is needed for Bitcoin
to gain traction, this also brings downside volatility and that’s why BTC is mainly treated
as a long-term investment for now. However, as adoption grows, volatility in either direction
should diminish. The final question asks how Bitcoin can be its own asset when priced
in dollars. Alden explains that BTC can be priced in any currency. Nothing in Bitcoin’s code
ties it to dollars and it’s often priced in other currencies and even other cryptos. Dollars are
the most commonly used simply because they’re the world’s largest and most liquid asset. She
explains that the dollar was once pegged to gold, but as the dollar grew dominant, gold became
primarily priced in dollars. Bitcoin is far from reaching that level, and it’s unlikely most
goods will be priced in BTC anytime soon. But this isn’t necessarily a flaw. Bitcoin is still
in its growth phase. Next, Alden examines how corporations fit into Bitcoin’s adoption journey.
She cites a 2014 article by Pierre Rashard, which envisioned entities borrowing money to accumulate
BTC back when BTC was just $600. I know, if only we had a time machine. Hey, today Bitcoin is far
more liquid, boasting a market cap of over $2 trillion. Wall Street is embracing it, and there
are billions of dollars worth of corporate bonds issued solely for holding BTC. The question is,
is this good or bad for the Bitcoin network? Alden identifies two main groups skeptical about this
trend. The first champions self-s sovereignty, often rooted in cipher punk values. They
see custodians as a threat to Bitcoin’s core principles and have dubbed corporate treasury
companies as suit coiners advocating self-custody. They warned that custodial rehypothecation
undermines Bitcoin’s role as a freedom money. The second group consists of critics who refuse
to change their stance despite Bitcoin’s growing success. Some of these even argue that Bitcoin
only succeeds because the Federal Reserve has printed so much money, which is ironically
one of the main reasons to be bullish on Bitcoin. Elden responds to both camps by saying
that quote, “Just because some large pools of capital choose to hold Bitcoin, it does not mean
that free range Bitcoin is in any way impaired.” Put simply, Bitcoin still works as it always has,
and the more entities that hold it, the easier it becomes to use as a peer-to-peer money. Some also
claim that Bitcoin is failing because governments, corporations, and institutions have captured
it. In reality, this adoption was always inevitable for Bitcoin to reach a global scale.
Alden then explains why by outlining three eras Bitcoin has gone through so far. Era 1,
the super early user era, was back when people mined Bitcoin on laptops. Mount Gaus was the sole
exchange and wallets and hardware were incredibly primitive. Era 2, the retail era. It came after
the collapse of Mount Gaus and this was when more exchanges became available and the first hardware
wallets were introduced in 2014. Era 3 is where we’re at right now and this is where Bitcoin has
become a major asset class. Institutional-grade infrastructure is being built. Publicly traded
companies are holding BTC. ETFs offer indirect exposure to its price. And even nation states are
adding it to their reserves. That’s one hell of a story arc for an asset that’s just 16 years old.
Importantly though, the key proponents of each era haven’t been lost. We can still mine or
buy BTC freely, and self-custody has never been easier. Crucially though, Bitcoin isn’t just for
corporations. It remains an open, permissionless system accessible to anyone with an internet
connection. Now, the final part of the report looks at the risks and opportunities presented
in the corporate era. Elden begins by reiterating that quote, “At a surface level, the question of
whether corporations are good or bad for Bitcoin is almost irrelevant because they’re inevitable
for Bitcoin at this scale.” She adds that quote, “If Bitcoin can’t succeed if corporations or
governments buy it, then it was never going to succeed. That would be like when aliens invade
Earth in a fiction story and end up losing because they are vulnerable to water signs or can’t deal
with basic germs, the war of the worlds. It was just never meant to be.” That’s an interesting
take to say the least. Regardless though, this does still leave a few questions unanswered.
namely whether corporations accumulating BTC present a risk to the network and whether these
risks can be mitigated. Put differently, does the growing centralization of BTC’s supply threaten
its growth? Well, according to Elden, these fears are overblown for one very good reason. Bitcoin is
a proofof work network, not a proof of stake. And this means that holding, say, 100,000 BTC grants
no more power over the network than holding 0.1 BTC. Neither amount can allow a holder to censor
transactions or manipulate the network. Alden adds that large amounts of BTC being held by a single
entity isn’t a new thing either. Mount Gox was at one point holding around 850,000 BTC and wallets
belonging to Satashi Nakamoto collectively hold over a million mind BTC between them and this was
back when BTC supply was roughly half of what it is today. Alden wisely notes that quote critics
of large institutional and sovereign owners of Bitcoin can and should call out bad practices
wherever they exist. People can and should support or donate to legal causes or software development
for areas of interest to them that benefit smaller users. Just like any public good, it’s reliant
on millions of individual actors working on the aspects that matter to them. Well said indeed. So
what opportunities do Bitcoin treasury companies offer then? Well, the most obvious benefit is that
more people than ever can gain exposure to BTC, whether through leveraged treasury firms or spot
Bitcoin ETFs. And this also helps investors avoid risky casino style altcoin marketing and reduces
the chances of them getting wrecked. Alden notes that while many investors chase altcoins
for their volatility and short-term upside, Bitcoin companies offer a more direct and often
better way to gain high beta exposure to BTC. And for ever greater risk and reward, investors
can even buy leveraged positions in these compan stocks. And that brings us to the end of the
article. And remember, you can find the full piece in the description below, and we encourage
you to give it a read. For now though, there’s just one question remaining. What’s next for
Bitcoin adoption and the crypto market? Well, so long as BTC’s price keeps climbing, more companies
and institutions will be drawn into adding it to their balance sheets. We’re already seeing more
companies adopting Bitcoin than ever before, and this trend is showing no signs of slowing
down. Nearly every company growing its Bitcoin treasury is doing so by issuing convertible debt
often earmarked solely for BTC purchases. And this creates a positive MNAV uh which stands for
multiple of net asset value. In plain English, a positive MNAV means the company is outperforming
BTC itself, making its stock highly attractive to investors. The risk here, of course, is that
the later these companies are into the game, the worse the terms will be for financing this
hoarding of BTC. And this means they’re naturally more at risk of liquidating their holdings if
Bitcoin’s price takes a dip. And this could cause a knock-on effect that drives prices down
further and could even cause enough panic to spark the next bare market. Yikes. The other risk
is more obvious, and that’s Bitcoin’s growing supply concentration. Simply put, if any major
holder dumps their massive BTC stash, it could crash the price. And this has sparked concerns
that this increased centralization clashes with Bitcoin’s core principles. However, it’s important
to remember that Bitcoin’s protocol doesn’t limit how much BTC any one entity can hold, and its
price going down wouldn’t destroy Bitcoin, as history has shown time and time again. In any
case, there’s no denying that the institutional adoption of Bitcoin is enormously bullish. And
as Bitcoin reaches new all-time highs, it seems that Bitcoin dominance could finally finally begin
to fall. And this means that all eyes are on the altcoin market, which is long overdue for a major
rally of its own. So, uh, buckle up, folks. It might be about to get wild. Okay. If you enjoyed
that video, you’ll love our latest one, which you can watch right over here. And if you’re not
subscribed to the channel, you can do that right over here. This is me for now. Thank you guys very
much for watching, and I’ll see you again soon.
