A new generation of BTC companies: from volatility to a sustainable business model

When Michael Saylor transformed his declining software company into a Bitcoin giant in 2020, he pulled off one of the most successful corporate transformations in recent memory by harnessing the immense power of capital markets.

Now, Cantor Fitzgerald—backed by institutional resources—is aiming to replicate Saylor’s success, but with even greater ambitions.

Together with stablecoin giant Tether Holdings SA and SoftBank Group, the new digital asset venture Twenty One Capital is positioning itself as the next-generation Bitcoin company with “pure exposure.” Like the former MicroStrategy (now renamed Strategy), Twenty One will raise capital to accumulate the digital token and invest in related products and infrastructure. But unlike Strategy, Twenty One is launching with deep-pocketed partners and a larger initial Bitcoin holding.

Thanks to the backing of its heavyweight supporters, the new Cantor-affiliated entity stands apart from previous imitators—some of which were obscure, low-market-cap companies. If Strategy is a highly volatile stock with a Bitcoin treasury, then Twenty One presents itself as a fully operational company—with plans to generate revenue, launch Bitcoin-focused products, and more.

“Twenty One could prove to be a significant competitor to Strategy, given the strength of its balance sheet and its backers,” said Strahinja Savic, head of data and analytics at FRNT Financial. “It’s the only company of its kind created specifically to acquire Bitcoin through the use of capital markets accessible to publicly traded corporations.”

Unlike Strategy, which pursued its Bitcoin ambitions solo while Wall Street watched skeptically, Twenty One—which went public via SPAC—launched with about $4 billion in Bitcoin, making it the third-largest Bitcoin treasury.

Much of the groundwork for the venture has already been laid. Cantor, the financial firm once led by former U.S. Commerce Secretary Howard Lutnick, recently launched its Bitcoin financing business. Cantor manages Tether’s reserves and holds a convertible bond loan issued by the stablecoin operator.

“The company has the backing of major and influential players in the crypto space, which will not only allow it to leverage their resources but also make a much stronger market entry than it could on its own,” said Mark Palmer, senior fintech and digital asset analyst at Benchmark, referring to Twenty One.

Success isn’t guaranteed. Under the leadership of Jack Mallers, Twenty One will need to convince market participants that it’s not just another crypto company if it wants to raise capital on competitive terms. Meanwhile, life is getting tougher for cryptocurrency issuers seeking funding via convertible debt. Representatives from Twenty One have not responded to requests for comment.

Saylor, for his part, sees the new competitor as validation of his years-long mission to convince U.S. corporate boards to maximize digital asset holdings.

“This is encouraging,” Saylor said at a New York conference in April following the announcement of Twenty One. “It’s good for the entire industry because it raises positive awareness about the opportunity—and it’s very legitimizing to see these companies making major investments. I hope 10 more show up.”

In fact, the number of companies mimicking Saylor has surged, with at least 30 publicly traded U.S. firms now following the model. Analysts at Bernstein forecast that Bitcoin could attract $330 billion through corporate treasuries by 2030. A subsidiary of Strive Enterprises Inc. is among the latest to join the trend.

Strategy currently holds about $55 billion in Bitcoin—far more than any of its imitators—and already plans to raise an additional $84 billion to buy more, through a mix of equity and debt offerings.

For Strategy, this self-reinforcing cycle of leverage and momentum has proven extremely successful. The company trades at a market cap that significantly exceeds the value of its Bitcoin holdings. This premium has resulted in a 36% rise in its stock this year, compared to just 6% for Bitcoin itself. Last year, it outperformed Bitcoin by 238 percentage points.

Strategy has long been seen as a proxy for Bitcoin exposure, especially before the arrival of Bitcoin ETFs in the U.S. in 2024. Even now, with a new generation of relatively cheap ETFs offering amplified exposure, Strategy still stands out as the most direct way to bet big on the original cryptocurrency, thanks to its massive holdings and use of leverage.

“It’s appealing if you’re trading volatility,” said Wilfred Day of Samara Alpha Management, which runs crypto hedge funds. “It’s a story shareholders want to hear.”

The prospectus for Twenty One outlines numerous ambitions, including “native lending models, capital instruments, and future innovations to replace outdated financial tools with Bitcoin-oriented alternatives,” as well as the creation of Bitcoin-focused content and media.

“They have a real business plan around Bitcoin that isn’t just a treasury strategy,” said Gustavo Gala, analyst at Monness, Crespi, Hardt & Co. Inc., about Twenty One.

Still, it’s easy to imagine how this “crypto machine” could lose its shine in a market downturn. Investors may reach a breaking point. Day from Samara pointed to some recent announcements of “Strategy copycats” that were poorly received—such as GameStop Corp., whose shares initially plunged after the company announced plans last month to take on debt to buy Bitcoin.

“The market is becoming more sensitive to MicroStrategy’s approach—shareholders are getting tired,” said Day, who is also chief strategy officer at Mercurity Fintech. “You’re starting to see some divergence in opinion.”