More on Strategy and Bitcoin Treasury Companies' Value (FT, Robert Armstrong) \ stacker news ~econ

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More on Strategy and Bitcoin Treasury Companies' Value (FT, Robert Armstrong)www.ft.com/content/b5238dec-9a7e-462b-8119-7d580926bd63

1060 sats \ 13 comments \ @denlillaapan 11 Jun econ

I'm pretty obsessed with this theme as of late — it is the greatest mystery in finance/Bitcoin. And since tradfi news outlets are obsessing over it as well, you're stuck with hearing my chant about it (#1003228, #984224, #991218, #1002405).

Here's Robert Armstrong, of FT Unhedged fame, asking the good questions:

"Why would you buy a company that buys bitcoin, rather than just buying bitcoin itself?"

Unlike at Christmas when you throw away the wrapping paper in your search for the goodies inside, in the echelons of high finance, the wrapper very much matters:

The Law of One Price, efficient markets (#971152), or arbitrage conditions would say that no, this does not compute... so Chanos shorts the fuck out of it (#1001018).

where is the magic here? ETFs that own gold track the gold price. ETFs that own bitcoin track the bitcoin price. Why should a company that owns bitcoin do better than bitcoin?

Strategy,

...currently trades at a 70 per cent premium to its net asset value [92% on a fully diluted basis], which is made up overwhelmingly of its bitcoin holdings. So when it sells equity and uses the proceeds to buy bitcoin, the transaction is instantly accretive.

Saylor argues that the premium exists in part because the stock is both very volatile and very liquid, which makes it attractive to shareholders who can sell at-the-market call options against it and generate a high yield

"I will note that financial strategies involving selling volatility tend to work until they don’t."

hashtag, Treasury-companies-are-this-cycle's-FTX.

One more sustainable source of bitcoin-holding companies’ premium valuation is that they are a particularly easy way to gain bitcoin exposure. In the UK, for example, getting bitcoin exposure can be fiddly. Buying bitcoin itself leaves you with the problem of storing it. The ban on buying bitcoin-linked exchange traded notes was only just lifted; buying US bitcoin ETF shares, for both retail and institutional investors, involves annoying paperwork. Buying Strategy shares is easy.

I mean, fine...?

Armstrong ending on the obvious:

their companies will only add value so long as the bitcoin market remains inefficient and cumbersome. If Bitcoin, as we are promised, becomes a universal and practical alternative to fiat currency, or even just a freely traded store of value like gold, the companies’ premiums to NAV should disappear.

I don't like the feel of this.

Unhedged unhedged here: https://archive.md/9zSPa

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125 sats \ 2 replies \ @Scoresby 11 Jun

in the echelons of high finance, the wrapper very much matters:

Does this imply much of high finance is just regulatory arbitrage?

And this business of meeting people where they are at: this is bitcoin, we don't do that.

But I totally applaud your obsession with this theme: you are my main window into tradfi reporting on the topic and I find your updates fabulous.

102 sats \ 0 replies \ @Undisciplined 11 Jun

Does this imply much of high finance is just regulatory arbitrage?

That’s pretty close to Doug Casey’s definition of speculation.

102 sats \ 0 replies \ @denlillaapan OP 11 Jun

Nice, man. I'm glad to hear it!

Stay tuned, there'll be cool stuff coming

68 sats \ 0 replies \ @seashell 11 Jun

The magic isn’t in the bitcoin, it’s in the wrapper premium, liquidity, volatility, option yield farming, and most importantly, regulatory arbitrage masquerading as simplicity. MSTR becomes the Bitcoin ETF for people who can’t or won’t touch the ETF. Tradfi loves convenience + leverage + the illusion of familiarity. But when the inefficiencies close, and Bitcoin becomes easier to own than Apple stock... what then? Maybe the next wrapper won’t be a company, but a personality cult. NGU meets influencer premium. Or maybe the real arbitrage is: everyone’s still underweight.

41 sats \ 3 replies \ @elvismercury 11 Jun

If Bitcoin, as we are promised, becomes a universal and practical alternative to fiat currency, or even just a freely traded store of value like gold, the companies’ premiums to NAV should disappear.

My bet is that disappearance of premium will be the least of anyone's worry, defining 'anyone' as people who care about NGU on a five-year time horizon.

You should do an article on what the unwind looks like, when pure ideological contagion unravels not just the treasury companies, but ETF flows, and then the political / regulatory pile-on due to a hard Left post-Trump swing where a message about protecting the world from finance-bro apocalypse returns to vogue.

44 sats \ 2 replies \ @denlillaapan OP 11 Jun

Maybe you should, Mr. Elvis. DM me a draft and I'll place it

11 sats \ 1 reply \ @elvismercury 11 Jun

I'm at the limit of my expertise already, I regret to say.

5 sats \ 0 replies \ @denlillaapan OP 11 Jun

I dooooubt it

24 sats \ 4 replies \ @xz 11 Jun

I hope I didn't skim over too fast, but it didn't seem to surprise me that there was not even acknowledgment of the reality that I thought was that, corporate/accredited investors not only would have difficulty getting exposure, you simply cannot gain exposure to Bitcoin through non-FCA regulated markets. Pension funds, for example, are not simply able to open a Coinbase account. Isn't this where MSTR came in?

One more sustainable source of bitcoin-holding companies’ premium valuation is that they are a particularly easy way to gain bitcoin exposure. In the UK, for example, getting bitcoin exposure can be fiddly. Buying bitcoin itself leaves you with the problem of storing it.

Or this article by FT's Robert Armstrong is only talking about retail. I don't have a full-time job writing for the FT, so I'll assume I'm wrong about something and assume the FT is impartial and exceedingly astute.

0 sats \ 3 replies \ @denlillaapan OP 11 Jun

Hahah nice assumptions you've got there ... be a shame if something would happen to them.

Nah, but srsly. Yeah ok, why can't the pension funds hold the ETFs...?

19 sats \ 2 replies \ @xz 11 Jun

Yeah, I might be a bit cavalier with my assumptions but, was really odd read. Well, I was under the impression not just just pension funds, but any company wanting to buy Bitcoin because.. it's supadupa risky asset. Right?

0 sats \ 1 reply \ @denlillaapan OP 11 Jun

Or something. But then who's buying all these MSTR-derivatives?

0 sats \ 0 replies \ @xz 11 Jun

Institutions first then retail? I'm not sure I even understand the difference in the different tickers, but that's what I understand. MSTR was just a regular equity (later backed with a Bitcoin treasury.) The derivative? tickers were first offered at huge denomination buy ins that is not for retail.