The Successful Path of Bitcoin Acquisition Giants: Analyzing Arbitrage Strategies

In the past five years, a company invested the equivalent of $40.8 billion, which is about Iceland's GDP, to acquire over 580,000 Bitcoins, accounting for approximately 2.9% of the Bitcoin supply or nearly 10% of active Bitcoins. The company's stock has soared 1600% in the past three years, far exceeding Bitcoin's increase of 420% during the same period, and its market value once surpassed $100 billion, making it a part of the Nasdaq 100 index.

Such astonishing growth inevitably sparked controversy. Some predict that the company will become a trillion-dollar giant, while others worry that it may be forced to sell Bitcoin, triggering market panic. However, most people lack a comprehensive understanding of the company's operating model. This article will delve into how the company operates and explore whether it truly poses a significant risk to the Bitcoin market.

Source of Funds Analysis

The company primarily raises funds to purchase Bitcoin through three channels: business operation revenue, stock issuance, and debt financing. Although debt financing is a focus of attention, in reality, most of the funds the company uses to buy Bitcoin come from stock issuance.

This seems counterintuitive - why would investors choose to buy the company's stock instead of directly purchasing Bitcoin? The answer lies in the existence of arbitrage opportunities.

Authorized Arbitrage: Unique Advantages

Many institutional investors are restricted by investment mandates and can only invest in specific types of assets. Although these restrictions enhance risk management, they also hinder capital from entering emerging fields such as the cryptocurrency market.

The company keenly identified this gap, providing these institutions with indirect access to Bitcoin. Before the emergence of Bitcoin ETFs, the company's stock was one of the few reliable Bitcoin exposure tools. This led to its stock frequently trading at a premium, which the company took advantage of to continuously increase its Bitcoin holdings.

In the past two years, investors holding the company's stock have achieved a 134% Bitcoin-denominated return, the highest return among large-scale Bitcoin investments in the market. Even after the launch of Bitcoin ETFs, this strategy remains effective, as many funds (, such as most mutual funds managing $25 trillion in assets, ) are still prohibited from investing in ETFs.

Flexible debt structure

In addition to cleverly utilizing the supply and demand relationship, the company also has significant advantages in debt management. Its debt terms are similar to a mortgage; as long as interest payments are made on time, creditors do not have the right to forcibly sell the company's assets. This flexibility allows the company to better cope with market fluctuations, turning stocks into a tool for "harvesting" the volatility of the cryptocurrency market.

Conclusion

The company's core business is not high leverage operations, but rather savvy arbitrage strategies. Although there is indeed some debt at present, the risks faced by the company are not severe unless the Bitcoin price falls to around $15,000 within five years.

As more companies follow this model, the market landscape may change. If these companies abandon premium pricing to compete and excessively leverage, it could lead to serious consequences. Therefore, it is crucial to closely monitor developments in this area.