Analyzing Global Encryption Concept Stocks: Emerging High Ground for Liquidity Outside the Crypto World

As the global financial regulatory environment becomes clearer, the cryptocurrency market is moving from a niche field into the mainstream financial system. The recent results of the U.S. elections have brought good news for the crypto industry, as Trump has promised to adopt a more friendly regulatory policy, including the establishment of a national Bitcoin reserve and encouraging the U.S. to expand Bitcoin mining activities. These measures have boosted market confidence. Against this backdrop, multiple blockchain concept stocks have generally risen.

More and more listed companies have realized the enormous potential of blockchain technology and have incorporated it into their strategic layout. Many blockchain concept stocks are experiencing strong growth and gaining significant attention and investment in the market. These companies are promoting digital transformation and value creation by introducing blockchain technology, gradually becoming important participants in the industry.

In recent years, especially with the regulatory benefits brought by the United States' introduction of cryptocurrency-related ETFs, it marks a deep integration of cryptocurrency with traditional capital markets. Data shows that the asset management scale of BlackRock's Bitcoin spot ETF ( IBIT ) has reached 17.243 billion USD, and it has almost been in a net inflow state since the beginning of the year. Grayscale's Bitcoin spot ETF ( GBTC ) has an asset management scale of 13.659 billion USD, demonstrating investors' interest and confidence in this emerging asset class.

The current total market capitalization of the cryptocurrency market is approximately $3.2 trillion, which can be divided into the following three main categories by asset class:

1. Bitcoin ( BTC ): As the core asset of the entire crypto market, its current market value is approximately $1.9 trillion, accounting for over 50% of the total market value of cryptocurrencies. It is not only a value storage tool recognized by both traditional finance and the native crypto world, but also because of its anti-inflation characteristics and limited supply, it has become the preferred choice for institutional investors, being dubbed "digital gold." Bitcoin plays a pivotal role in the crypto market, stabilizing it while also providing an interconnected bridge between traditional assets and native on-chain assets.

2. Native on-chain assets: including public chain tokens ( such as Ethereum ETH), decentralized finance ( DeFi) related tokens, as well as functional tokens in on-chain applications, etc. This field has a wide variety of types, high volatility, and its market performance is driven by technological updates and user demand. Currently, the market capitalization is approximately $1.4 trillion, which is actually far lower than the market's expectations for high growth.

3. The combination of traditional assets and encryption technology: This field covers the tokenization of on-chain real-world assets ( RWA ), emerging projects such as blockchain-based securitized assets, etc. Currently, its market value is only a few hundred billion dollars, but with the popularization of blockchain technology and the deep integration of traditional finance, this field is rapidly developing. By tokenizing traditional assets and enhancing liquidity, it is also one of the main driving forces for growth in the future crypto market.

Why are we so optimistic about the growth potential of traditional assets?

In the past six months, the asset attributes of Bitcoin have undergone a new evolution, and the dominant forces in the capital market have also completed the transition from old powers to new funding.

In 2024, the position of cryptocurrency in the traditional financial sector is further consolidated. Financial giants, including BlackRock and Grayscale, have launched exchange-traded products for Bitcoin and Ethereum, providing institutional and retail investors with more convenient channels for digital asset investment, which further confirms the connection with traditional securities.

At the same time, the trend of tokenizing real-world assets ( RWA ) is also accelerating, further enhancing the liquidity and coverage of financial markets. For example, the German state development bank KfW issued two digital bonds totaling €150 million in 2024 using blockchain technology. These bonds were settled using distributed ledger technology ( DLT ). The French computer equipment manufacturer Metavisio issued corporate bonds, utilizing tokenization to provide capital support for its new manufacturing facility in India. This also demonstrates that traditional financial institutions are leveraging blockchain technology to optimize operational efficiency, and many financial institutions have already integrated encryption technology into their business models.

Today, a capital circulation model centered on Bitcoin, utilizing ETFs and the stock market as the main channels for capital inflow, and leveraging listed companies as the carrying platform, is continuously absorbing dollar Liquidity and expanding comprehensively.

The combination of traditional finance and blockchain will generate more investment opportunities than native on-chain assets. This trend reflects the market's emphasis on stability and practical application scenarios. The traditional financial market has a solid infrastructure and mature market mechanisms, and when combined with blockchain technology, it will unleash greater potential.

From these perspectives, it can be observed that the future development of the encryption market is not just about the incremental growth of digital coins, but also the enormous potential for integration with traditional finance. From regulatory dividends to changes in market structure, blockchain concept stocks are at a critical juncture in this major trend, becoming the focal point of global investors' attention.

We categorize the current blockchain concept stocks into the following types:

1. Asset-Driven Concept:

Regarding the concept of asset allocation in blockchain stocks, the company's strategy is to use Bitcoin as the primary reserve asset. This strategy was first implemented by MicroStrategy in 2020 and quickly attracted market attention. This year, other companies such as the Japanese investment company MetaPlanet and the Hong Kong-listed company Boyaa Interactive have also joined in, with the acquisition of Bitcoin continuously increasing. MetaPlanet announced the introduction of the key performance indicator "Bitcoin Yield"(BTC Yield) set by MicroStrategy, with its third quarter BTC Yield at 41.7%, and in the fourth quarter( as of October 25,) reaching as high as 116.4%.

Specifically, the strategy of companies like MicroStrategy is to introduce "Bitcoin Yield" as a key performance indicator, providing investors with a new perspective to evaluate the company's value and investment decisions. This indicator is based on the diluted number of outstanding shares and calculates the amount of Bitcoin held per share, without considering Bitcoin price fluctuations, aiming to help investors better understand the company's actions in purchasing Bitcoin through the issuance of additional common shares or convertible instruments, focusing on measuring the balance between the growth of Bitcoin holdings and equity dilution. As of now, MicroStrategy's Bitcoin investment yield has reached 41.8%, indicating that the company has successfully avoided excessive dilution of shareholder interests while continuously increasing its holdings.

However, despite MicroStrategy's significant achievements in Bitcoin investment, the company's debt structure has still attracted market attention. According to reports, MicroStrategy's current total outstanding debt amounts to $4.25 billion. During this period, the company has financed through multiple rounds of issuing convertible bonds, some of which also come with interest payments. Market analysts are concerned that if Bitcoin prices drop significantly, MicroStrategy may need to sell some Bitcoin to repay its debt. However, there are also views that, due to MicroStrategy's reliance on its stable traditional software business and low interest rate environment, its operating cash flow is sufficient to cover debt interest, so even if Bitcoin prices plummet, it is unlikely to force the company to sell its Bitcoin assets. Furthermore, MicroStrategy's stock market value currently reaches $43 billion, and the proportion of debt in its capital structure is relatively small, which further reduces liquidation risk.

Despite many investors being optimistic about the company's firm Bitcoin investment strategy, believing it will bring substantial returns to shareholders, some investors have expressed concerns about its high leverage and potential market risks. Given the extreme volatility of the cryptocurrency market, any adverse market changes could significantly impact the asset value of such companies, and their stock prices are significantly premium relative to their net asset value. Whether this condition can be sustained is the focus of market attention. If the stock price experiences a correction, it may affect the company's financing ability and, in turn, impact its future Bitcoin purchase plans.

1、Microstrategy(MSTR)

MicroStrategy was founded in 1989, initially focusing on the field of business intelligence and enterprise solutions. However, starting in 2020, the company transformed into the world's first publicly traded company to use Bitcoin ( BTC ) as a reserve asset, a strategy that fundamentally changed its business model and market position. Founder Michael Saylor played a key role in driving this transformation, evolving from an early Bitcoin skeptic to a staunch supporter of encryption.

Since 2020, MicroStrategy has continuously purchased Bitcoin through its own funds, bond financing, and other means. As of now, the company has accumulated approximately 279,420 Bitcoins, with a current market value of nearly 2.3 billion USD, accounting for about 1% of the total Bitcoin supply. The most recent purchase took place between October 31 and November 10, 2023, acquiring 27,200 Bitcoins at an average price of 74,463 USD. The average holding price of these Bitcoins is 39,266 USD, while the current Bitcoin price has reached around 90,000 USD, resulting in a paper profit for MicroStrategy of nearly 2.5 times.

Despite facing a paper loss of about $1 billion during the bear market in 2022, MicroStrategy has never sold its Bitcoin, instead choosing to continue to increase its holdings. Since 2023, the strong rise in Bitcoin has significantly boosted MicroStrategy's stock price, with a year-to-date return on investment reaching 26.4% and a cumulative return on investment exceeding 100%. MicroStrategy's current business model can be seen as a "BTC-based cyclical leverage model," raising funds through bond issuance to purchase Bitcoin. Although this model brings high returns, it also carries certain risks, especially during periods of extreme volatility in Bitcoin prices. According to analysis, Bitcoin prices would need to fall below $15,000 for the company to face liquidation risk, and with the current Bitcoin price close to $90,000, this risk is very low. Additionally, the company has a low leverage ratio and strong demand in the bond market, which further enhances MicroStrategy's financial stability.

For investors, MicroStrategy can be seen as a leveraged investment tool in the Bitcoin market. With expectations of a steady rise in Bitcoin prices, the company's stock has significant potential. However, caution is needed regarding the medium to long-term risks that may arise from debt expansion. In the next 1 to 2 years, the investment value of MicroStrategy is still worth paying attention to, especially for investors who are optimistic about the prospects of the Bitcoin market; this is a high-risk, high-return asset.

2、Semler Scientific(SMLR)

Semler Scientific is a company focused on medical technology, and one of its innovative strategies is to use Bitcoin as a main reserve asset. In November 2024, the company disclosed that it had recently purchased 47 Bitcoins, bringing its total holdings to 1,058 coins, with a total investment amount reaching approximately $71 million. Part of the funds for these acquisitions comes from operating cash flow, indicating that Semler is attempting to strengthen its asset structure through its Bitcoin holdings, positioning itself as a representative of innovation in asset management.

However, Semler's core business still focuses on its QuantaFlo device, which is mainly used for diagnosing cardiovascular diseases. However, Semler's Bitcoin strategy is not just a form of financial reserve; in the third quarter of 2024, the company realized an unrealized gain of $1.1 million from its Bitcoin holdings, providing a financial hedge for Semler amidst economic fluctuations, despite a 17% year-over-year decline in revenue for that quarter.

Despite Semler's current market capitalization of only $345 million, which is far lower than MicroStrategy, its strategy of adopting Bitcoin as a reserve asset has led investors to see it as a "mini MicroStrategy."

3. Boya Interactive

Boyaa Interactive is a publicly listed company primarily engaged in gaming, ranking among the top developers and operators in China's chess and card games industry. Since the second half of last year, it has been exploring the crypto market with the aim of fully transforming into a Web3 listed company. The company has acquired a large amount of encryption assets such as Bitcoin and Ethereum, and invested in several Web3 ecological projects. It has also signed a subscription agreement with Pacific Waterdrop Digital Asset Fund under Waterdrop Capital to collaborate strategically in the Web3 game development and Bitcoin ecological fields. The company has stated: "Purchasing and holding cryptocurrencies is an important measure for the Group's development and layout of Web3 business, and also for this collection.