This week, SharpLink, a NASDAQ listed company with a $2 million market cap and around 750,000 shares issued, announced a $425 million financing to pursue an ETH treasury strategy – essentially a plan to buy a lot of ETH, the native currency of the Ethereum blockchain. The deal was led by Consensys, a prominent company within the Ethereum ecosystem, with a roster of high profile crypto investors, including ParaFi Capital, Electric Capital, Pantera Capital, Arrington Capital, Galaxy Digital, Ondo, White Star Capital, GSR, Hivemind Capital, Hypersphere, Primitive Ventures, and Republic Digital among others. Consensys Founder Joe Lubin will Chair the Board of Directors.
SharpLink is following in the footsteps of Strategy (formerly MicroStrategy) and other companies who have found success growing quickly through Bitcoin treasury strategy – that is, using balance sheet capital or raising new money to buy Bitcoin. Today, MicroStrategy
has a market cap of around $100 billion USD and owns more than 3% of all BTC outstanding.
SharpLink surged 500% with the ETH pivot on its first day, mimicking the success of other high profile crypto treasury companies. SharpLink aims to become to ETH what Strategy is to BTC: a permanent capital vehicle with ETH on its balance sheet, trading at a premium to NAV, and able to issue new stock to buy yet more ETH.
Why would anyone pay a premium to net asset value (NAV) to own shares of a company whose main business is holding Bitcoin or Ether, when low-cost ETFs offer direct, NAV-tracking exposure? It’s a fair question. Let’s first look at Strategy, the Bitcoin-focused company.
The answer lies in part in how Strategy uses its capital structure as a corporation to its advantage. The company uses convertible debt and equity issuance to systematically accumulate Bitcoin, increasing its BTC-per-share over time. Unlike ETFs, which maintain a 1:1 backing, Strategy creates what Michael Saylor calls “Bitcoin yield”: accretive issuance of shares that increases each share’s BTC exposure. This embedded leverage makes Strategy a higher beta play on Bitcoin. So long as the stock is trading at a premium, every purchase is ‘accretive’ that is it increases the BTC/share, even if end-investors of the equity are paying a premium to the fair market value of the BTC.
Beyond leverage, Strategy benefits from its public equity wrapper. It can be held in institutional mandates, trades on an exchange, can be used as collateral, and may be included in major indices at some point. Some of these features are also true of ETFs. But there is another key difference: Strategy issues convertible notes, which are securities eligible for inclusion in fixed income portfolios, adding in a whole new category of investors.
More nebulous and harder to explain is the question of ‘narrative.’ Strategy has become more than a Bitcoin holder – it’s now a meme in and of itself, the talisman for hard-money in a world awash with fiat debasement. It’s also in a self-reinforcing loop: investors believe the company will continue to grow its BTC holdings by issuing new equity and convertible notes and increase the Bitcoin per share. This belief drives the premium, which is
reflexive.
We have talked about reflexivity in crypto markets
before. It can cut both ways. Today it is the flywheel of accretive issuance and BTC/share growth. But if Bitcoin drops significantly, MSTR will have to sell Bitcoin to meet its debt obligations. The only way to do that is by selling more Bitcoin, which in turn can compress the premium to NAV. That’s the risk.
Back to SharpLink, the Ethereum model may work even better than a Bitcoin model. Whereas Bitcoin is primarily a buy and hold asset, ETH offers staking yield, programmability, DeFi and other dApp integrations. Treasury-held ETH can be staked to generate yield, increasing ETH/share without dilution. That’s not possible with BTC and a lot of that is not possible within an ETF, making the corporate structure more advantageous. In other words, you can run an operating business, using ETH as a treasury asset, inside a corporation.
In most scenarios, these companies are buyers of their underlying asset. Unlike an ETF, where units can be created (when there is buying pressure) and redeemed (when there is selling pressure), with a corporate structure, investors who want to exit can only sell the stock. They can not redeem in-kind or in-cash for their investment. This one-way structure may amplify price effects during bull markets. Notably, this is not true for debt instrument holders, who may be able to redeem at par when the loan has expired.
Still, risks remain. Premiums are sentiment-driven and can evaporate. Just ask Grayscale, whose Bitcoin and Ether trusts once traded at a huge premium to NAV before reversing into a discount.
More broadly, emergence of SharpLink and other crypto treasury companies shows a growing acceptance of crypto in traditional finance and plenty of demand for exposure to these assets.
They also blur the lines between traditional finance and crypto, which we explore further in today’s newsletter.
Increasingly, we are seeing crypto-native companies venture more into traditional finance. For example, Kraken and Coinbase have recently shared plans to offer tokenized securities and other real-world assets to clients, while the Big Banks are collaborating to enter the stablecoin market. The market is forcing their hand, as are changing regulations. The GENIUS Act, which will regulate stablecoins, is likely to pass through the Senate and become law. This latest announcement from the big banks of a ‘groupthink approach,’
reminds me of similar consortium blockchains of old. Can incumbents adapt to change or will they be disintermediated? How many treasury companies can the market absorb? In what other important ways will ‘tradfi’ and ‘crypto’ begin to merge? We will get many of our answers in H2 2025.
May 29, 2025
