Exec-Edge
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By Rayk Riechmann
With a big push from the White House, investments by major financial institutions and even large university endowments, cryptocurrency has gone mainstream. The latest trend: a niche class of publicly-traded companies available to all investors which serve as proxies for major tokens like Bitcoin, Ethereum and Solana.
Public companies such as Tesla and Coinbase have leveraged cryptocurrencies as a hedging tool or passive reserve for quite some time now. The new generation of crypto-embracing companies, however, have put digital currencies at the center of their capital and value-creation strategy. These “core strategy” companies include Strategy (MSTR), Sol Strategies Inc. (HODL.CN), DeFi Development Corp. (DFDV), Upexi (UPXI), Metaplanet Inc. (MTPLF) and more. These firms trade mostly on their token holdings and net asset value (NAV) rather than their underlying operating business.
Investors, ranging from institutions to retail investors want crypto exposure but face legal, operational, or compliance barriers. In these cases, regulated public equities offer a familiar structure and easy access to digital assets while meeting custody, tax, and liquidity needs. As a clear gateway to crypto these equities trade like synthetic ETFs for digital assets.
With their ability to raise capital through equity offerings, convertible notes, and PIPE deals, these innovators have effective means to expand their digital asset base. Especially in bullish markets, fully-valued equity can be issued to buy relatively undervalued tokens. See this example: A company trades at 2x NAV and issues $10M in equity – it buys $10M of BTC with the cash and increases NAV by $10M – Company valuation rises by $20M at 2x NAV. Equity dilution is a key risk-factor to monitor when employing this strategy.
Some industry participants look to create even more shareholder value beyond token appreciation and creative financial engineering with income from proof-of-stake assets, particularly Solana. DFDV and UPXI, for instance, generate income from validating network transactions which can be used to offset operating and financing costs or reinvested to compound token exposure.
Crypto-core strategies have gained traction because early movers have consistently traded at significant premiums to their token NAV, ranging from 1x to 5.5x NAV. This results in significant returns for shareholders and in some cases outstanding financial performance, with stock price returns upwards of 3000%. These equities can provide significant returns and leveraged access to crypto, but the risks are equally significant. Regulatory changes, volatility of the underlying assets and general market de-risking can trigger big swings overnight.
