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

With the global financial regulatory environment becoming increasingly clear, the cryptocurrency market is gradually moving from niche to mainstream financial systems. After Trump was elected president, he adopted more favorable regulatory policies for the industry, including establishing a national Bitcoin reserve and encouraging the expansion of Bitcoin mining activities, which boosted market confidence. Against this backdrop, a general transmission appeared in the capital market, and multiple blockchain concept stocks saw widespread gains.

More and more publicly listed companies are realizing the enormous potential of blockchain technology and incorporating it into their strategic layout. Many blockchain concept stock companies are experiencing strong development momentum, gaining significant attention and investment in the market. These companies are driving digital transformation and value creation in their businesses by introducing blockchain technology, gradually becoming important players in the industry.

In recent years, especially with the regulatory dividends brought by the launch of cryptocurrency-related ETFs in the United States, it marks that cryptocurrencies are no longer limited to a closed digital currency market but are deeply integrated with traditional capital markets. Grayscale's Bitcoin Trust has become a bridge for traditional investors to enter the crypto market. Data shows that the asset management scale of a Bitcoin spot ETF under a certain trading platform has reached $17.243 billion and has almost been in a net inflow state since the beginning of the year. Meanwhile, Grayscale's Bitcoin spot ETF has an asset management scale of $13.659 billion, demonstrating investors' interest and confidence in this emerging asset class.

The total market capitalization of the current 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 recognized as a store of value by traditional finance and the native crypto world, but also due to its anti-inflation characteristics and limited supply, it has become the preferred choice for institutional investors, being dubbed "digital gold." Bitcoin plays a key hub role in the crypto market, stabilizing the market while 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, high volatility, and its market performance is driven by technological updates and user demand. The current market capitalization is approximately $1.4 trillion, which is significantly lower than the market's expected high growth.

3. The combination of traditional assets and encryption technology: This field encompasses 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 the future growth of the crypto market. We are confident in this segment, believing it will drive traditional finance towards a more efficient and transparent digital transformation, unleashing enormous market potential.

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 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 a certain trading platform, have launched exchange-traded products for Bitcoin and Ethereum, providing both 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, Germany's state-owned development bank KfW issued two digital bonds totaling 150 million euros in 2024 using blockchain technology. These bonds are settled through distributed ledger technology ( DLT ). The French computer equipment manufacturer Metavisio issued corporate bonds, using tokenization to provide capital support for its new manufacturing facility in India, which also shows that traditional financial institutions are leveraging blockchain technology to optimize operational efficiency. Many financial institutions have already incorporated encryption technology into their business models.

Nowadays, a funding circulation model centered around Bitcoin as the core asset, using ETFs and the stock market as the main channels for capital inflow, and leveraging US-listed companies like MSTR as the carrying platform, is continuously absorbing dollar liquidity and expanding comprehensively.

The combination of traditional finance and blockchain will create 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.

This research report will briefly analyze the growth model of blockchain concept stocks, particularly how they combine with on-chain assets to uncover more innovative investment opportunities. For example, MSTR's issuance model demonstrates a typical path of exchanging on-chain assets for dollar assets through convertible bonds and stock issuance. Recently, MSTR's stock price has rapidly surged alongside the increase in Bitcoin prices, with its convertible bond due in 2027 achieving a three-year high in yields, a strategy that has allowed its stock performance to far exceed that of traditional tech stocks.

From these perspectives, it can be seen that the future development of the encryption market is not just an increment of digital currency itself, but the enormous potential for integration with traditional finance. From regulatory dividends to changes in market structure, blockchain concept stocks are at a key node in this major trend, becoming the focus of global investors.

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

1. Asset-Driven Concept:

Regarding blockchain stocks related to the concept of asset allocation, the company's strategy is to use Bitcoin as a 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) established by MicroStrategy, with its third-quarter BTC Yield at 41.7%, and the fourth quarter ( reaching as high as 116.4% as of October 25, ).

Specifically, the strategy of companies like MicroStrategy is to introduce "Bitcoin Yield" as a key performance indicator, providing investors with a new perspective to assess the company's value and investment decisions. This metric is based on the diluted number of outstanding shares and calculates the amount of Bitcoin held per share, disregarding Bitcoin price fluctuations, aiming to help investors better understand the company's actions of 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 raised concerns in the market. Reports indicate that MicroStrategy currently has a total outstanding debt of $4.25 billion. During this period, the company has raised funds through multiple rounds of issuing convertible bonds, some of which come with interest payments. Market analysts are worried that if Bitcoin prices fall sharply, 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 the 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 stands at $43 billion, with debt making up a small proportion of its capital structure, which further reduces the liquidation risk.

Despite many investors being optimistic about the company's firm Bitcoin investment strategy, believing it will bring substantial returns to shareholders, there are also some investors who express concerns about its high leverage and potential market risks. Due to 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 at a significant premium relative to their net asset value, raising concerns about whether this status can be sustained. If there is a pullback in stock prices, it may affect the company's financing ability, which in turn could impact its future Bitcoin purchasing 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 transition, shifting 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 coins, with a current market value of nearly $23 billion, accounting for about 1% of the total Bitcoin supply. The most recent purchase occurred between October 31 and November 10, 2023, where 27,200 coins were acquired at an average price of $74,463. The average holding price of these Bitcoins is $39,266, while the current Bitcoin price has reached approximately $90,000, resulting in a paper profit of nearly 2.5 times for MicroStrategy.

Despite facing a paper loss of about $1 billion during the 2022 bear market, MicroStrategy has never sold any Bitcoin and instead chose to continue increasing its holdings. Since 2023, the strong rise in Bitcoin has significantly boosted MicroStrategy's stock price, with a year-to-date return on investment of 26.4% and a cumulative return on investment exceeding 100%. MicroStrategy's current business model can be seen as a "BTC-based circular leverage model," financing the purchase of Bitcoin through bond issuance. Although this model brings high returns, it also carries certain risks, especially during periods of significant Bitcoin price volatility. According to analysis, Bitcoin's price would need to fall below $15,000 for the company to potentially face liquidation risk, and with the current Bitcoin price approaching $90,000, this risk is minimal. Furthermore, the company's leverage ratio is low, and there is strong demand in the bond market, all of which further enhance 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, one must be cautious of the medium to long-term risks that may arise from debt expansion. In the next 1 to 2 years, MicroStrategy's investment value remains worthy of attention, especially for investors 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 its primary reserve asset. In November 2024, the company disclosed that it had recently acquired 47 coins, increasing its total holding to 1,058 coins, with a total investment amounting to approximately $71 million. Part of the funds for these acquisitions came from operating cash flow, indicating that Semler is attempting to strengthen its asset structure through its Bitcoin holdings, becoming 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 financial reserve; in the third quarter of 2024, the company realized an unrealized gain of $1.1 million from its Bitcoin holdings. Despite a 17% year-on-year decline in revenue for that quarter, it still provided Semler with a financial hedge against economic fluctuations.

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

3. Boya Interactive

Boyaa Interactive is a publicly listed company primarily engaged in gaming.