Why Twenty One Capital Is More About Volatility Than Bitcoin - Ep. 826
🎯 Summary
Podcast Episode Summary: Why Twenty One Capital Is More About Volatility Than Bitcoin - Ep. 826
This 75-minute episode of Unchained, hosted by Laura Shin, focuses on the launch of 21 Capital, a new Bitcoin holding company backed by major players including Tether, SoftBank, and Cantor Fitzgerald. The discussion centers on how 21 Capital positions itself as a successor or evolution of the MicroStrategy (MSTR) model, but with potentially different strategic focuses, particularly around financial engineering and yield generation on the asset side.
1. Focus Area
The primary focus is the Bitcoin corporate treasury strategy exemplified by MicroStrategy, and how 21 Capital intends to innovate upon this model. Key themes include financialization of Bitcoin, capital market instruments, the introduction of new performance metrics (BPS and BRR), and the potential for generating yield through Bitcoin-backed lending and other utility-focused applications.
2. Key Technical Insights
- Avoiding Liability Triggers: A key learning from MicroStrategy’s experience is the danger of using capital instruments (like the Silvergate loan) that carry margin call triggers or onerous covenants, which create stock volatility during price drops. 21 Capital aims to structure its capital stack to be resilient to significant Bitcoin price declines.
- Asset-Side Yield Generation: Unlike MicroStrategy’s primary focus on liability engineering, 21 Capital emphasizes actively managing the asset side of its balance sheet, potentially through native lending models or using Bitcoin as collateral for capital market functions (e.g., margin for derivatives trading) to earn incremental yield beyond simple HODLing.
- Bitcoin Security Model Evolution: There is a recognition that the long-term security of Bitcoin may eventually depend on income-generating activities beyond block rewards, prompting discussion about channeling energy into developing utility like the Lightning Network, even if current economics remain unclear.
3. Market/Investment Angle
- Volatility Monetization: The core investment thesis discussed is that investors buying into these Bitcoin holding companies (like 21 Capital at a high premium) are primarily buying a volatility monetization scheme, not just an earnings scheme. The stock price reacts more to the volatility of the underlying asset than to traditional earnings reports.
- KPI Clarity is Crucial: The introduction of metrics like Bitcoin Per Share (BPS) and Bitcoin Return Rate (BRR) is seen as necessary to bridge the gap between crypto accumulation and Traditional Finance (TradFi) investor understanding, allowing for measurable progress on the treasury strategy.
- Risk of Lending Models: While yield generation is a goal, the 2022 crypto lending collapses (Celsius, Voyager, etc.) highlight the extreme risks associated with counterparty risk and underwriting in this space. Any lending strategy must prioritize robust over-collateralization.
4. Notable Companies/People
- 21 Capital: The new entity formed by Tether, SoftBank, and Cantor Fitzgerald, aiming to be a pure-play Bitcoin hyper-financialization vehicle.
- MicroStrategy (MSTR) / Michael Saylor: The established benchmark for corporate Bitcoin accumulation, whose strategies (both successes and perceived mistakes) 21 Capital is learning from.
- Jack Mallers (Strike Founder): Highlighted as the leader of 21 Capital, bringing a younger, more optimistic, and utility-focused vision compared to Saylor’s inflation-fighting narrative. His background in commodities trading is also noted.
- Cantor Fitzgerald: Their involvement suggests a focus on bridging TradFi capital markets friction with crypto-native operations.
5. Regulatory/Policy Discussion
The discussion did not delve deeply into specific regulations but touched upon the political and capital element of major institutional players (Tether, SoftBank) converging on Bitcoin, symbolizing a significant global shift in capital alignment around the asset.
6. Future Implications
The conversation suggests the industry is moving toward hyper-financialization of Bitcoin via corporate structures. We will likely see more experimentation with different coin vehicles and a greater focus on developing utility (like DeFi or lending) on top of Bitcoin to secure its long-term security model and provide non-store-of-value benefits. The generational difference between Saylor and Mallers suggests a shift in the dominant narrative surrounding Bitcoin adoption.
7. Target Audience
This episode is most valuable for Crypto and TradFi Investment Professionals, Hedge Fund Managers, Corporate Strategy Officers, and Analysts tracking the institutional adoption and financial engineering surrounding Bitcoin.
🏢 Companies Mentioned
💬 Key Insights
"I think the winner is the entity that will be able to manufacture the greatest amount of volatility for the minimal capital deployment necessary to advertise the vehicle."
"those who are buying today CEP at 3X the premium are buying something else, and what they're buying isn't an earnings monetization scheme; they're buying a volatility monetization scheme."
"by creating these KPIs, especially again, there's BTC Yield, which is the percentage terms, and of the Bitcoin that has been accumulated by Strategy, and then there is BTC Dollar Yield, which is the amount of dollars equivalent of Bitcoin that is being created through that same strategy, because you have BTC Dollar Yield, you're able to create an equity-like projection and discounted model to come up with a valuation."
"if you're going to be comfortable buying Strategy or buying a 21 Capital at two times NAV or three times NAV, you have to get comfortable with the notion that these firms' treasury strategies, the strategies that they have been employing and will continue to employ to acquire more Bitcoin, in and of themselves have value, that that function is the equivalent of a value-creating engine for any other company..."
"Cantor is that bridge. Cantor is representation is the American that then ties into Wall Street, where the capital markets endeavors that you and I just discussed will be brought forth in financializing Bitcoin where Americans have some skin in the game."
"I think once again, we may be at the very edge, the very front edge of a significant influx of institutional capital into the crypto space."