The New Trend of Public Companies: A Deep Dive into the Crypto Assets Reserve Economic Model

Introduction

By mid-2025, an increasing number of listed companies are beginning to incorporate Crypto Assets (, especially Bitcoin ), into their corporate treasury asset allocation. Data shows that in June 2025 alone, 26 new companies added Bitcoin to their balance sheets, bringing the total number of companies holding BTC globally to approximately 250.

These companies span multiple industries ( technology, energy, finance, education, etc. ) and different countries and regions. Many companies view Bitcoin's limited supply of 21 million as a hedging tool against inflation and emphasize its low correlation with traditional financial assets. This strategy is quietly moving towards the mainstream: as of May 2025, 64 companies registered with the SEC collectively hold approximately 688,000 BTC, accounting for about 3-4% of the total Bitcoin supply. Analysts estimate that more than 100-200 companies worldwide have incorporated Crypto Assets into their financial statements.

encryption asset reserve model

When a publicly listed company allocates part of its balance sheet to Crypto Assets, a core question arises: how did they finance the purchase of these assets? The following analysis will use MicroStrategy as a primary example, as most other companies are actually replicating its model.

main business cash flow

Although the theoretically "healthiest" and least dilutive way is to purchase Crypto Assets with the free cash flow generated by the company's core business, in reality, this approach is almost impractical. Most companies lack sufficient stable and large-scale cash flow to accumulate significant reserves of BTC, ETH, or SOL without relying on external financing.

Taking MicroStrategy as a typical example: the company was founded in 1989 and was originally a software company focused on business intelligence, with its main products including HyperIntelligence, AI analytics dashboards, and so on. However, these products have only been able to generate limited revenue until now. In fact, MSTR's annual operating cash flow is negative, which is far from the hundreds of billions of dollars it has invested in Bitcoin. It can be seen that MicroStrategy's Crypto Assets treasury strategy has not been based on internal profitability from the very beginning, but relies on external capital operations.

A similar situation also occurred at SharpLink Gaming. The company transformed into an Ethereum vault carrier in 2025, purchasing over 280,706 ETH(, approximately 840 million USD). Clearly, it could not rely on the revenue from its B2B gaming business to carry out this operation. SBET's capital formation strategy mainly relies on PIPE financing and direct stock issuance, rather than operating income.

Capital Market Financing

Among publicly traded companies that adopt encryption vault strategies, the most common and scalable method is through public market financing, raising funds by issuing stocks or bonds, and using the proceeds to purchase Bitcoin and other Crypto Assets. This model allows companies to build large-scale encryption vaults without tapping into retained earnings, fully leveraging the financial engineering methods of traditional capital markets.

Issuing Stocks: A Traditional Dilutive Financing Case

In most cases, issuing new shares comes with costs. When a company raises funds by issuing additional shares, two things usually happen:

1. Ownership is diluted: The shareholding ratio of existing shareholders in the company decreases.
2. Earnings per share ( EPS ) decreased: Under the condition of unchanged net profit, the increase in total shares led to a decrease in EPS.

These effects usually lead to a decline in stock prices, mainly for two reasons:

• Valuation Logic: If the price-to-earnings ratio (P/E) remains unchanged while EPS declines, the stock price will also fall.

• Market Sentiment: Investors often interpret financing as a sign that a company is lacking funds or is in distress, especially when the raised funds are used for unproven growth plans. Additionally, the supply pressure from a large influx of new stocks into the market can also lower market prices.

MicroStrategy's anti-dilution equity model

MicroStrategy is a typical counterexample to the traditional narrative of "equity dilution = harm to shareholders." Since 2020, MSTR has actively raised capital through equity financing to purchase Bitcoin, with its total shares outstanding growing from less than 100 million to over 224 million by the end of 2024.

Despite the dilution of equity, MSTR often outperforms Bitcoin itself. Why? Because MicroStrategy has long been in a state where "market value exceeds the net value of its held Bitcoin," which we refer to as mNAV > 1.

Understanding Premium: What is mNAV?

When mNAV > 1, the market values MSTR higher than the fair market value of the Bitcoin it holds.

In other words, when investors gain exposure to Bitcoin through MSTR, the price paid per unit is higher than the cost of directly purchasing BTC. This premium reflects the market's confidence in Michael Saylor's capital strategy and may also represent the market's belief that MSTR offers leveraged, actively managed BTC exposure.

Support of traditional financial logic

Although mNAV is a crypto native valuation metric, the concept of "trading prices above the underlying asset value" has long been prevalent in traditional finance.

The reasons why the company often trades at a price higher than its book value or net assets are mainly as follows:

Discounted Cash Flow ( DCF ) Valuation Method

Investors are concerned with the present value of the company's future cash flows, not just the assets it currently holds.

This valuation method often leads to a company's trading price being much higher than its book value, especially in the following situations:

• Expected growth in revenue and profit margins
• The company has pricing power or a technological/commercial moat.

Profit and Revenue Multiple Valuation Method ( EBITDA )

In many high-growth industries, companies typically use P/E( price-to-earnings ratio) or revenue multiples for valuation:

• High-growth software companies may trade at a multiple of 20-30 times EBITDA.
• Early companies may trade at 50 times revenue or higher even without profits.

MicroStrategy has advantages that Bitcoin itself does not possess: a corporate shell that can access traditional financing channels. As a publicly traded company in the United States, it can issue stocks, bonds, and even preferred shares to raise cash, and it has indeed done so with remarkable results.

Michael Saylor cleverly utilizes this system: he has raised billions of dollars through the issuance of zero-interest convertible bonds and the recently launched innovative preferred stock products, and he has invested all of this capital into Bitcoin.

Investors recognize that MicroStrategy can leverage "other people's money" to make large-scale purchases of Bitcoin, and this opportunity is not easily replicable by individual investors. The premium of MicroStrategy "is not related to short-term NAV arbitrage," but rather comes from the market's high trust in its capital acquisition and allocation capabilities.

mNAV > 1 How to achieve anti-dilution

When MicroStrategy's trading price is higher than its net asset value of held Bitcoin (, i.e., mNAV > 1), the company can:

1. Issue new shares at a premium price
2. Use the raised funds to purchase more Bitcoin ( BTC )
3. Increase total BTC holdings
4. Promote the synchronized increase of NAV and enterprise value.

Even with an increase in circulating shares, the amount of BTC held per share (BTC/share) may remain stable or even rise, making the issuance of new shares a anti-dilution operation.

What happens if mNAV < 1?

When mNAV < 1, it means that each dollar of MSTR stock represents a BTC market value exceeding 1 dollar ( at least on paper ).

From a traditional finance perspective, MSTR is trading at a discount, that is, below its net asset value (NAV). This poses challenges in capital allocation. If the company finances with stock in this situation to buy BTC, from the shareholders' perspective, it is actually buying BTC at a high price, thereby:

• Diluted BTC/share( per share BTC holding )
• and reduce the value of existing shareholders

When MicroStrategy faces a situation where mNAV < 1, it will be unable to maintain the "issue new shares → purchase BTC → increase BTC/share" flywheel effect.

So what choices are left at this point?

Buy back stocks instead of continuing to buy BTC

When mNAV < 1, repurchasing MSTR stocks is a value-adding behavior, for reasons including:

• You are repurchasing stocks at a price lower than their intrinsic value in BTC.
• As the number of circulating shares decreases, BTC/share will rise.

Saylor has explicitly stated: If the mNAV is below 1, the best strategy is to repurchase stocks rather than continue buying BTC.

Method One: Issue Preferred Shares

Preferred stock is a type of hybrid security that lies between debt and common stock in a company's capital structure. It typically provides fixed dividends, has no voting rights, and has priority over common stock in profit distribution and liquidation. Unlike debt, preferred stock does not require repayment of principal; unlike common stock, it can provide more predictable income.

MicroStrategy has issued three classes of preferred shares: STRK, STRF, and STRC.

STRF is the most straightforward tool: it is a non-convertible perpetual preferred stock that pays a fixed cash dividend of 10% annually on a par value of $100. It does not have an equity conversion option, nor does it participate in the stock price increase of MSTR, providing only income.

The market price of STRF will fluctuate around the following logic:

• If MicroStrategy needs financing, it will issue more STRF, thereby increasing supply and causing the price to drop.
• If the demand for returns in the market surges ( as during periods of low interest rates ), the price of STRF will rise, thereby reducing the effective yield;
• This forms a price self-adjusting mechanism, with a typically narrow price range, for example $80-$100, driven by yield demand and supply and demand.

Since STRF is an non-convertible, fundamentally non-redeemable instrument ( unless tax or capital trigger conditions are met ), its behavior is similar to that of a perpetual bond, allowing MicroStrategy to repeatedly "buy the dip" in BTC without needing to refinance.

STRK is similar to STRF, with an annual dividend of 8%, but it has added a key feature: it can be converted into common stock at a ratio of 10:1 when the MSTR stock price exceeds $1,000, effectively embedding a deeply out-of-the-money call option that provides holders with long-term upside potential.

STRK has a strong appeal for both companies and investors, for reasons including:

Asymmetric Upside Opportunities for MSTR Shareholders:

• The price of each STRK share is approximately $85, raising $850 for 10 shares;
• If in the future it converts to 1 share of MSTR, it means the company is buying BTC at a cost of $850 at present, but it will only be diluted if the MSTR stock price rises above $1,000;
• Therefore, during the MSTR < $1,000 period, it is non-dilutive, reflecting the appreciation brought about by the previous BTC accumulation even after conversion.

Yield Self-Stabilizing Structure:

• STRK pays a dividend of $2 each quarter, annualized to $8;
• If the price falls to $50, the yield will rise to 16%, attracting buying support for the price;
• This structure makes STRK behave like a "bond with options": defensive on the downside, participatory on the upside.

Investor Motivation and Conversion Incentives:

• When MSTR's stock price exceeds $1,000, holders are motivated to convert to common stock;
• With MSTR further rising to $5,000 or $10,000(, the dividends of STRK become negligible), with a yield of only about 0.8%(, accelerating the conversion;
• Ultimately forming a natural exit channel, transforming temporary financing into a long-term shareholder structure.

MicroStrategy also reserves the right to redeem STRK, with conditions including that the remaining number of unconverted shares is less than 25% or special triggering situations such as tax issues.

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