Written by: Matt Levine
Translated by: jk
Bitcoin Treasury
The basic logic is as follows: The US stock market is willing to pay $2 for a cryptocurrency worth $1. If you have a large amount of cryptocurrency, the best approach is to merge with a small US-listed company, which would double the value of your cryptocurrency. This phenomenon has given rise to some peculiar market dynamics and will further trigger more unusual phenomena. Two of these are worth noting:
First, if you own a large amount of cryptocurrency, you definitely need a listed company. Therefore, providing listed company shell resources to cryptocurrency investors has become a good business (especially for small listed companies with few existing businesses, allowing them to easily transform into pure cryptocurrency holding platforms). For example, if you have $100 million in Bitcoin, merging with a listed company can make it worth $200 million. So even if this listed company has no value other than its listing status, you are willing to pay its shareholders $40 million.
Second, if you own a large amount of cryptocurrency, never sell it to cryptocurrency buyers, but instead sell it to the stock market. Suppose you have 1,000 Bitcoins. Selling them in the Bitcoin market would only fetch $118 million, but if packaged as a cryptocurrency treasury company and listed, it could be worth $236 million.
Regarding the first point, we often discuss cases of small listed companies being acquired by cryptocurrency entrepreneurs and transformed into cryptocurrency treasury companies. However, this approach is both inefficient and arbitrary: If you want to publicly list a cryptocurrency on a securities exchange, why must you find a failed listed biotech company, negotiate with its executives, finalize the deal, and then fire the biotech researchers? Why don't investment banks directly provide ready-made listed shell resources, so you don't have to struggle to transform biotech/toy/alcohol companies into cryptocurrency companies, but can start from scratch?
Of course, banks are indeed doing this business. This business of providing publicly listed shell companies is the SPAC (Special Purpose Acquisition Company) business. Cantor Fitzgerald LP (whose CEO was previously the US Secretary of Commerce) specializes in this business: doing both regular SPAC fundraising and specialized SPAC mergers with Bitcoin pools. We mentioned Cantor Equity Partners Inc in April. This is a SPAC under Cantor that announced an agreement with Bitfinex/Tether and SoftBank to package their Bitcoin into a listed company. The company will be named Twenty One Capital Inc, and the SPAC is currently trading at about a 200% premium relative to its Bitcoin value. This transaction is very profitable for Tether and SoftBank. The same goes for Cantor, the SPAC initiator, which will receive substantial returns from this deal.
[The translation continues in the same manner for the rest of the text, maintaining the original structure and translating all non-technical terms while preserving specific names and technical terms as specified.]From a long-term perspective, is this model sustainable? If every Bitcoin whale can establish their own Bitcoin treasury company to earn more money, how will existing Bitcoin treasury companies continue to acquire more Bitcoin? Of course, there are still some small investors; if you only have 0.1 Bitcoin, you won't specifically go public for it, so you'll still sell to MicroStrategy, Twenty One, BSTR, or other companies. I think ultimately there will be stock-for-stock mergers between Bitcoin treasury companies. Those companies with lower premiums will be acquired by companies with higher premiums. I'm looking forward to seeing the fairness opinions for these transactions.
Anyway, so far, BSTR's transaction seems less than ideal: around noon today, the SPAC stock was trading at about $13.93 per share, which means BSTR's Bitcoin reserves have only about a 39% premium, far below the over 100% premium I usually expect. Perhaps the market for such transactions is finally becoming saturated?
Meme Coin Market: Don't Ask, Just Say You Didn't "Get the Vibe"
In traditional financial structure design, if you work at a bank and a customer says "I want a tradable instrument X that reflects the price of another thing Y," you have to carefully consider how to link X and Y. Perhaps you would think of designing an arbitrage mechanism that allows Y holders to exchange it for X, thereby keeping X and Y's prices synchronized. Perhaps you could construct a basket of Y, and X would be a tradable ownership share of this basket. Perhaps you could call three banks daily to inquire about Y's quotation and take the average as X's daily settlement price. Perhaps X's settlement price could be derived from the historical level of an untradable index of Y. The specific plan varies by situation, but generally, it's a challenging problem. For example, "I want a tradable tool that reflects US housing prices": Of course, it's a good idea, we all want it, but which specific houses? How do you ensure this tool accurately reflects housing prices?
Then the cryptocurrency field discovered a truly great financial innovation: you can completely avoid those complex designs and rely purely on "vibe". You announce "I'm launching a new token HomePriceToken, which will reflect US housing prices." Then a traditional financial practitioner like me would ask "Wait, how does it reflect housing prices?" You answer "It just reflects, isn't it written in the name, this is HomePriceToken, what's the problem?" I continue to ask "What arbitrage mechanism—" you say "Stop talking, this is HomePriceToken."
This discovery is usually called a "meme coin", which I often joke about, but it's indeed an interesting conceptual innovation. The core idea of meme coins is: (1) It has a name that associates it with some underlying thing, (2) Its trading price is related to the underlying thing, not because of any arbitrage mechanism, but just because of the name. When people think more about Doge, Dogecoin's price rises, just like that.
This discovery is interesting because it opens the door to financialization for various things that typically have no price at all. Housing value is still somewhat traceable—although there are complex issues of liquidity and aggregation—but meme coins are not limited to traditional assets. Meme coins can reflect summer hit songs, actors' popularity, the health of the US democratic system. Not in the predictive market way—not settled based on some external facts—but just in the meme coin world. If the democracy coin rises, democracy is doing well, and vice versa, don't ask why.
I'm not saying this isn't absurd, it is indeed absurd, but it's an interesting absurdity. Here's Taylor Lorenz's report on Gen Z's meme coin slang:
Every day, 20-year-old college student Boeshi scrolls social media, looking for new words and phrases. He tracks the usage of huzz, soyboy, baddie, mewing, not just to use in conversations with friends, but to invest and make money.
As new Gen Z and Alpha generation slang continues to go viral, a complete financial ecosystem is quietly taking shape. Young people are investing real money in meme coins linked to popular phrases, hoping to profit from the popularity of these words.
"These brain-dead terms, the more they're used, the higher the coin price," Boeshi said. "The more viral the word, the more viral the coin."
"Is there an arbitrage mechanism between vocabulary usage and coin price," I interjected, but then my brain completely froze, and Boeshi happily ignored my question.
In this emerging attention economy, viral spread is equivalent to monetary value. If a word is trending, the corresponding coin will surge. When the heat fades, the price drops. "When a word starts trending, you'll find it correlates with Google search peaks," Boeshi said. "Then the decline also correlates with the coin's historical trend." Currently, there are dozens of slang meme coins available for trading on the alternative crypto site Pump.fun.
Okay, fine. Huzz. Rizz. Skibidi. Also, here's the complete research paper on meme coin manipulation by Alberto Maria Mongardini and Alessandro Mei:
Unlike utility-focused crypto assets like Bitcoin or Ethereum, meme coins' value primarily comes from community sentiment, making them susceptible to manipulation. This study conducted a cross-chain analysis of the meme coin ecosystem, examining 34,988 tokens on Ethereum, BNB Smart Chain, Solana, and Base. We described the token economics characteristics of meme coins and tracked their growth through a three-month longitudinal analysis. We found that among high-yield tokens (>100%), an astonishing 82.6% showed evidence of extensive use of artificial growth strategies designed to create a false impression of market interest. These methods include wash trading and what we define as Liquidity Pool Inflation (LPI), which involves dramatic price increases through small strategic purchases. We also found evidence of schemes aimed at harming investor interests for personal gain, such as pump and dump. Notably, most tokens involved had previously experienced wash trading or LPI, suggesting that early manipulation often paves the way for subsequent exploitation. These findings reveal the prevalence of manipulation in high-performing meme coins and imply that their dramatic rises are more likely to result from coordinated human manipulation than natural market dynamics.
Imagine launching one of those 17.4% of meme coins that weren't manipulated. It looks really lazy.
