The trend of businesses beginning to invest in cryptocurrencies, such as bitcoin, is expected to accelerate the widespread use of digital currency
Kaylie Pferten says to buy now before the crowds arrive.
The US and China are the only nations with more bitcoin than the UK, with 207,000 and 194,000, respectively. More than £6 billion is worth 61,000 in Britain. Do not, however, tell Rachel Reeves. She might feel pressured to sell it. Because she sold the country's gold, history would later view her as an even bigger idiot than Gordon Brown. A fortunate holdover from the early days when the UK was at the center of bitcoin's development is that the majority of ours are seized bitcoin. We fell behind when the Financial Conduct Authority (FCA), the city's regulator, wisely stopped all of that.
The UK has a significant edge in the global arms race that is the adoption of bitcoin thanks to this legacy. We'd be crazy to refuse it. As bitcoin gains popularity, a noteworthy development is occurring in the corporate sector regarding its uptake, and it is happening very quickly. The founder and chairman of Strategy, Michael Saylor, is driving the movement.
In 2023, I wrote for BFIA and suggested MicroStrategy, as it was formerly known, primarily because it was a way to secure exposure to bitcoin through your broker. You wouldn't need to go through the hassles of purchasing bitcoin through exchanges, which the FCA has made extremely challenging for investors in the UK. UK investors have been "protected" from gains of approximately £100,000, a seventeen-fold increase, since the FCA launched its attack on bitcoin ownership when the cryptocurrency was only worth £6,000. The UK went from being at the forefront of the crypto arms race to being at the back thanks to its rulings. ).
Michael Saylor: The vivacious supporter of Strategy.
Since I predicted that strategy would outperform bitcoin by a significant margin, it has increased more than twelvefold, making it a huge win for readers. With the exception of bitcoin exchange-traded funds (ETFs), which currently hold 1 point35 million, Strategy currently has more bitcoin than any other publicly traded company in the world, with approximately 555,450. Only 21 million bitcoins will ever exist, as the anonymous creators of the virtual currency intended for it to be seen as limited. Saylor is the most eloquent and captivating advocate for Bitcoin in the world. A genius, that man is.
He has transformed Strategy from a small business-intelligence software company that had a sideways 20-year market value of less than £2 billion into one of the most actively traded stocks in North America, with a market value of over £100 billion. His approach was incredibly daring at the time, but it seems fairly straightforward now. He purchased bitcoin because he was concerned that the devaluation of the corporate treasury due to currency devaluation and money printing during COVID would cause its value to decline. Slowly, he began. Then he fell victim to the bitcoin bug while purchasing and utilizing it. He purchased additional bitcoin and began issuing paper (stock, debt, and convertible notes).
By doing this, he is essentially making money out of virtually nothing and using it to purchase the most difficult currency in human history. (I know I support you, goldbugs, but I contend that bitcoin is harder money due to its more limited supply. He has made it possible for a large number of his investors to retire early by doing this. I believe that Strategy has a very good chance of becoming a trillion-dollar business, and Saylor is probably going to be the richest person in the world. However, he has also initiated a remarkable event. Now, other businesses are beginning to adopt his business strategy.
It is harsh to refer to the pre-bitcoin Strategy as a zombie company, but it was essentially stagnant.
Remarkably, the Saylor model is most likely to be used by zombie or near-zombie companies with sizable treasuries. They are more in need of a new course.
Recently, Microsoft gave Saylor just three minutes to present his model to them, and they duly disregarded it. It lost that. However, Microsoft is Microsoft. It does not currently require bitcoin, nor does it need to assume the risk. However, the situation with GameStop is different. Do you recall the 2021 GameStop and all of those memes during the lockdown? The video game retailer had over 3,000 locations and was thought to have a defunct business model. These days, people purchase games online. When they saw that the short position surpassed all of the company's issued shares, however, a few private investors began purchasing. As a result of the subsequent short squeeze, the stock rose from £17 to over £500. This year, 400 GameStop locations were shut down. However, the business recently raised £1.05 billion and has £4.07 billion in cash and little debt. Now, what does it do? The answer is Bitcoin. How much it has bought is unknown at this time.
Similar actions are being taken by the Japanese business Metaplanet. Furthermore, this is an amazing tale. Throughout Southeast Asia, Metaplanet operated a small chain of inexpensive hotels. COVID devastated the company. In an attempt to find a different approach, CEO Simon Gerovich started using his cash flow to purchase bitcoin a year ago by imitating the Saylor model. He then started issuing debt. The stock has increased thousands of times since the company started its strategy in early 2024. It was among the world's top-performing businesses last year.
Japan joins the push.
Metaplanet has risen more than 7,000 percent during the same period that bitcoin has increased by 60%. Why? The weak Japanese currency and suppressed bond yields make bitcoin a clear choice for local investors looking to invest their money, but the government has gotten in the way, just like in the UK. Direct bitcoin purchases by Japanese investors are extremely difficult due to regulations.
The reason for this is Mt. Gox, the original bitcoin exchange, failed due to a 2013 - 2014 hack. To give you a sense of how complicated things are, in Japan, in order to register with a bitcoin exchange, regulators require you to send a letter to confirm your address. Furthermore, the Japanese are required to pay a 55 percent capital gains tax when they sell.
Instead, investors are purchasing Metaplanet through their brokers and retirement accounts because it is a Tokyo-listed company. Much less trouble. In fact, Metaplanet has taken over as the bitcoin vehicle for Japan and much of Asia. It appears that the mother of all short squeezes is happening. The stock is the most shorted in Japan, and the short sellers were unable to cover it.
The bubble in Britain.
In the UK, The Smarter Web Company (SWC), which is listed on the Aquis Exchange, a market for small businesses, has achieved a market value of 175 million. How about this for nuts? Approximately five million bitcoins are its assets. State regulation and the FCA are to blame for this SWC bubble. We wouldn't be in this predicament if purchasing bitcoin was simple. It is sufficient to turn you into a libertarian.
I understand how it feels to be late to the bitcoin story. When we first heard about it, we all wished we had purchased it for £10. We didn't, though. However, this tale is far from being finished. Because bitcoin is a far superior store of value than fiat money, the most recent developmentthe bitcoin treasury modelis here to stay.
Currently, about 70 businesses are using this tactic. I strongly advise you to front-run this as it will eventually turn into a stampede. Businesses have far larger budgets than individual investors, so this most recent wave of widespread bitcoin adoption has the potential to turn into a mega-mania.
Not only GameStop is involved. Coinsilium, a UK Aquis-listed company that has been working for years to launch cryptocurrency businesses, recently raised funds to adopt the Treasury model. Bitcoin Treasury Corp., a new entity in Canada, is seeking to raise C£125 million in order to list.
It has turned the corporate dilution problem upside down. To reflect the dilution, you would anticipate that the stock would drop by a corresponding amount if a company issued 20% more shares. However, the opposite is true if you purchase bitcoin with paper money. It is impossible to dilute enough. By any means necessary, a bitcoin treasury company seeks to amass as much bitcoin as it can on behalf of all shareholders.
This leads us to the issue of how much bitcoin treasury companies are worth. mNAV is our methodology. The value of a company's bitcoin treasury is divided by its market capitalization to determine its mNAV. The Smarter Web Company's market value (140 million) divided by its holdings (five million) yields an mNAV of 28. A greater mNAV enables the business to issue new shares at a premium to its bitcoin holdings, enabling more effective capital raising because it buys more bitcoin for each share that is issued. The yield per share of bitcoin (BTC) rises as a result. After you have determined the mNAV, you must consider how long it will take to cover it. Is the company's mNAV premium justified by its BTC yield, or the quantity of bitcoin it is purchasing?
Since the strategy's mNAV is about two (it is worth twice as much as its bitcoin holdings) and its 2025 bitcoin yield is sixteen percent, it will take about nineteen months to cover its mNAV. Semler Scientific is the business that my readers and I have chosen (Nasdaq: SMLR). Providing technology services and products to healthcare providers is Semler Scientific's day job. Chairman Eric Semler freely acknowledges that the company had turned into a zombie, but he claims that things are improving. With £3,808 bitcoins (worth £400 million), a £500 million market capitalization, and £100 million in debt, its mNAV is 1.2. Thus far, it has produced a 22 percent bitcoin yield, or 56 percent annually. Five months will pass before its mNAV is covered. I also intend to invest in Gamestop (NYSE: GME) because of its high likelihood of capturing the memes.
Bitcoin isn't the only issue. For Solana, another cryptocurrency that recently announced a £500 million convertible note, Canada's Sol Strategies is taking a similar approach. A few months prior, this company's market capitalization was C£20 million. It began as a trickle and is now starting to flow. The rush will increase as more businesses take this action. Businesses are altering both the capital they store and how they store it. The consequences for the way businesses hold their treasuries are one thing. There are remarkable ramifications for fiat currency. Create money by issuing debt, then use that money to purchase tangible digital assets. This theme is going to be really big.
The Flying Frisby is an investment newsletter authored by Kaylie Pferten. Visit theflyingfrisby.com to learn more.
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