Earlier this year, a little-known British web design firm called Smarter Web Company saw its market value explode from £4 million to over a billion pounds in just 2 months.

The reason? Well, they announced that they would start buying Bitcoin.

Now, I know what you're thinking. 4 million to a billion, Bitcoin hasn't gone up that much, has it?

Well, that's not how this works.

Smarter Web is not alone.

All around the world, a growing number of companies, many with no prior connection to cryptocurrencies, have started transforming themselves into what people are calling Bitcoin treasury companies.

Some are issuing debt and others hybrid securities to fund their crypto purchases.

What began as a crazy experiment by Micro Strategy, a US software firm, has now gone global as businesses seem to hope that buying Bitcoin will spike their stock prices like it did for Micro Strategy, whose core software business generates tiny revenues and operates at a loss.

Businesses seem to hope that buying Bitcoin will spike their stock prices like it did for Micro Strategy, whose core software business generates tiny revenues and operates at a loss.

But its aggressive Bitcoin purchases have turned it into a $100 billion company.

Micro Strategy, I should note, recently changed its name from Micro Strategy to Strategy.

I guess the initial name suggested that they had a very small strategy and getting rid of the micro in the company name possibly implies a new confidence in what they're doing.

Strategy is in the business of running an unprofitable software company and owning a big pile of bitcoins.

Because a lot of investors are not very good at math, strategy worked out that they could sell their stock at a large premium to the value of the bitcoins that they own and then use that money that they raised by selling stock to buy even more bitcoins, pushing the bitcoin price higher and their stock price higher, too. an infinite money glitch.

If anyone ever tries to lecture you on the efficient markets hypothesis, do ask them to explain this dynamic to you.

And if they have a really good explanation, tell me because I'm struggling a bit with this one.

Before discovering that stock investors will pay roughly $2 for a dollar's worth of Bitcoin, Micro Strategy described itself as a business intelligence and software company, specializing in data analytics.

It went public in 1998 during the dotcom boom and the company's stock price initially soared.

In March 2000, just as the dotcom bubble was bursting, Micro Strategy was forced to restate its financial results for the previous two years or its entire history as a public company due to accounting irregularities.

This triggered a stock price collapse and marked one of the first major corporate scandals of the dot crash.

The SEC accused the company founder along with two other company officials of committing fraud by reporting profits when the company was actually losing money, which you're not supposed to do.

That was 25 years ago, though, and not everyone is great at accounting.

Other than his recent $40 million settlement for committing what the DC Attorney General described as the largest income tax fraud in Washington history, the CEO, Michael Sailor, has mostly kept out of trouble.

As Matt Lavine has pointed out, the breakthrough that stock investors will pay $2 for a dollar's worth of Bitcoin is a financial perpetual motion machine.

And once it's been discovered, other people start to notice.

And because you probably can't patent it, other companies are guaranteed to copy the idea.

They pivot from being web design companies, Japanese hotel chains, or whatever nonsense they've been wasting their time on to accumulating piles of Bitcoin and selling stock at a premium to the value of that pile so that they can buy even more Bitcoin.

In the past year alone, the number of listed companies holding Bitcoin has surged by nearly 170% with more than 130 firms now collectively owning over 800,000 bitcoins.

This is more than 3% of the total supply.

These companies span industries as diverse as web design, mining, healthcare, video game retail, and media.

and they're united by a common belief that Bitcoin is not just a digital asset, but a strategic reserve capable of unlocking investor enthusiasm, capital market access, and exponential share price growth.

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The recent excitement around cryptocurrencies isn't just a corporate trend.

It seems to be a cultural and political moment, too, especially in the United States where the president and his wife have both launched extremely successful meme coins.

successful for them, at least not the people who bought them.

Obviously, the Trump administration appears to have embraced crypto as a pillar of its economic agenda, with Vice President J. D. Vance declaring at a recent Las Vegas conference that we want our fellow Americans to know that crypto and digital assets and particularly Bitcoin are part of the mainstream economy and are here to stay.

Vice President J. D. Vance declaring at a recent Las Vegas conference that we want our fellow Americans to know that crypto and digital assets and particularly Bitcoin are part of the mainstream economy and are here to stay.

President Trump has already overseen a loosening of the federal government's approach to regulation of cryptocurrencies.

The SEC has dropped, paused, or reached agreements in more than a dozen cases and investigations, and the Department of Justice disbanded its crypto enforcement team.

The FT reported back in May that the legal and political changes that caused Bitcoin prices to spike also sparked a rush to list crypto treasury companies who offered to sell shares and debt in order to finance the accumulation of large crypto reserves.

That month, the media company run by President Trump's family confirmed plans to raise $2.5 billion to buy up crypto.

21 Capital, a business run by Jack Mers, who was influential in making Bitcoin legal tender in El Salvador, struck a deal with Caner Equity Partners, headed up by Brandon Lutnik, the son of Commerce Secretary Howard Lutnik, and backed by Soft Bank and the stable coin operator Tether to buy billions of dollars of Bitcoin.

These are some of the most respected names in the crypto industry.

the US politician and the first person to have been laid off by Doge, Vivec Ramaswarmi's asset management firm Strive and American Bitcoin, a crypto miner part owned by President Trump's sons announced a merger giving their Bitcoin acquisition vehicles access to a stock market listing and with it the opportunity to raise further funds.

Strive announced that it planned to raise as much as $1.5 billion dollars to support a first wave of Bitcoin acquisitions.

A spa Yeah. Um, spaxs are back too called Nakamoto Holdings merged with an opioid healthc care group called Kindly MD to set up a corporate Bitcoin treasury.

The CEO of the firm said that it was packaging Bitcoin into various forms to attract buyers from other markets.

A Japanese hotel developer called Metaplanet saw its share price rocket after announcing plans to raise about $5.4 billion to add to its stockpile of Bitcoin.

Tesla, who first bought $1.5 billion worth of Bitcoin in 2021 when it claimed that it would soon accept payments in the cryptocurrency, then sold 75% of the position a year later.

But the robo taxi manufacturer has once again become a significant Bitcoin holder.

Tesla reported a $600 million boost in its earnings last year due to a change in accounting rules where it recognized the rise in the price of its crypto holdings.

In the following quarter, Tesla decided to exclude a $97 million cryptoreated loss and a much larger expense tied to stock-based compensation.

I guess it's always hard to know if you should include or exclude items like this.

Block, a company co-founded by former Twitter CEO and beard enthusiast Jack Dorsey, first started buying Bitcoin 5 years ago and last year set out to invest 10% of its monthly gross profits from its Bitcoin products back into Bitcoin as an investment.

A Chinese AI software company called Next Technology Holding, which was once known as We Trade Group, great name, was about to be delisted by NASDAQ because its stock price had declined so much.

It managed to use the Micro Strategy Infinite Money Glitch to boost its stock price and remain listed after it issued shares and warrants to buy Bitcoin.

Even GameStop, the video games retailer, announced that it had started buying Bitcoin, which surprisingly caused the stock price to fall 10%.

I think this is because GameStop investors feel that the company's focus should stay on the extremely profitable business of selling video games, Pokemon cards, and NFTTS at mall-based locations across the United States and not get distracted by other business lines.

I'm reliably told that these are great businesses to be in.

Now, even London, long seen as a cautious observer of the cryptocurrency boom, has piled in and joined the fry as a wave of small cap British firms have become Bitcoin treasury companies, hoping to ride the same wave that has lifted their American and Asian counterparts.

According to the FT, at least nine UK listed companies in the final week of June alone announced that they have either bought Bitcoin to add to their corporate treasuries or that they plan to do so.

The firms ranging from AI startups to gold miners are embracing the cryptocurrency not for its technological promise, but for its potential to ignite investor interest and turbocharge share prices.

Now, you might think that Michael Sailor, who first came up with the Bitcoin perpetual money machine company idea, would be upset that other people are copying his strategy or micro strategy.

But he doesn't appear to be.

In fact, he's pitching that big companies like Microsoft should buy Bitcoin instead of buying back their own shares, which he describes as legacy capital strategy.

The thing is, Michael Sailor owns bitcoins and he probably doesn't own Microsoft stock.

It's of no benefit to him if they pay a dividend or reduce their share count, but it would help him out quite a bit if other companies were to buy up the illquid asset that he owns as that would push the price higher and higher.

According to the FT, most of the UK listed businesses that are buying up Bitcoin to boost their stock prices are small loss-making companies that have tiny trading volumes and see Bitcoin as the solution to trigger explosive share price growth.

Many are listed on the Micro Cap Aquis exchange, although a few are listed on London's main stock exchange.

Now, before you start making fun of these companies, I should let you know that many of their stocks are up 400% since making these announcements.

Metaplanet, the Japanese hotel company whose CEO converted from hotel year to hodler, is up almost 600% over the last year.

Why would you waste your time cleaning bedrooms and hauling people's suitcases up a stairs when you could just buy some crypto?

In a year when most businesses are worried about being hit by tariffs, it possibly makes sense to drop all other business activities and just buy crypto.

All of the other stuff, as Michael Sailor would point out, is unnecessary.

These are legacy business activities.

For many of the firms that have made this discovery, Bitcoin is not just a treasury asset. It's a lifeline.

Bluebird Mining Ventures, which had been struggling with project delays and financial losses, credited Bitcoin strategy with reviving shareholder interest and securing new funding.

Similarly, Binance, a former mining operation, is rebranding as the London BTC company, positioning itself as a regulated gateway to Bitcoin exposure rather than whatever it was before.

It may be somewhat understandable that British investors are buying these stocks as the British financial regulators have banned retail investors from buying exchangeraded products linked to cryptocurrencies and other types of madeup money.

Bitcoin treasury companies allow British equity investors to get exposure to an asset class that many see as being complex and difficult to hold.

It's not obvious to me why they would pay a huge premium to do this, but they will, and they do.

It's much more confusing that American investors will pay up to own a company that owns Bitcoin when Bitcoin ETFs already exist.

Convertible bonds have been another way for Micro Strategy to raise money.

Convertible bonds usually pay a fixed interest rate, which is a bit lower than regular bonds pay, but they can be converted into shares at an agreed price, allowing investors to benefit from equities unlimited upside while providing the perceived downside protection of owning bonds.

The fact that Micro Strategy stock is extremely volatile, in fact, it's more volatile than the underlying Bitcoin means that the company can issue bonds with a higher conversion premium than usual and even offer zero interest on the debt.

Investors in these bonds have been attracted by the huge potential upside of the company's stock price and the perceived downside protection of owning bonds.

Matt Lavine at Bloomberg points out that one group of investors, the convertible bond holders, is benefiting from this volatility and another group is being harmed by it as there are a large number of investors buying levered strategy ETFs which are to a certain extent a bet against volatility.

This is because the more volatile the underlying stock is, the worse a leveraged ETF does at tracking its returns.

The fact that convertible bond investors typically hedge their equity exposure through a dynamic hedging strategy where they buy low and sell high would mean that the more convertibles that are outstanding, the more that this hedging activity would be expected to mute the volatility of the stock.

The fact that leveraged ETF buyers do the opposite means that they're amping up the volatility.

So the levered ETF buyers are offsetting the volatility damping effects of the convertible bond arbitrage investors.

The rise of Bitcoin treasury companies marks a shift in how some companies think about capital risk and investor engagement.

As what began as a slightly mad experiment by a single US software firm now appears to have gone global with more than 130 listed companies holding over 3% of the world's Bitcoin supply.

From Tokyo to London, businesses are leveraging into cryptocurrency not just as a hedge or an investment, but as a strategic tool to access capital markets, revive flagging share prices, and rebrand themselves for a new financial era.

This strategy is not without its perils.

Bitcoin treasuries are yet to be tested by a prolonged downturn in cryptocurrency prices, which could leave them struggling to repay debt that they've taken on to build up their stock piles.

For those who believe in the future of Bitcoin, all of this makes sense.

Companies that leverage up to buy crypto will earn higher returns as we drift towards the point where Bitcoin replaces the dollar as the global reserve currency.

Most investors possibly still prefer to own real assets that generate cash flows and see this as a risky bet on an asset of questionable future value.

The governance dimension of this corporate strategy can't be ignored either.

Obviously, not all shareholders are aligned with the vision of turning operating companies into crypto funds.

The fact that it's boosted stock prices so far means that these investors can just sell their shares and walk away with a profit.

But as more firms adopt this strategy, boards will face growing pressure to justify the risks and will possibly have to explain themselves when the strategy blows up.

It's always somewhat entertaining to see how crypto reshapes itself over time.

Bitcoin was originally created in response to the global financial crisis of 2008 and the loss of trust in traditional centralized financial systems that occurred at that time.

It was seen as a response to the perceived flaws of centralized finance offering a decentralized transparent and user controlled alternative for financial transactions.

When the price started running up, it was no longer a currency.

You wouldn't use it to buy things.

It was now an appreciating asset.

Later, it was pitched as digital gold, but it failed on that front as it fell in value when inflation kicked in after the pandemic.

Now, Bitcoin investors are trying to encourage central banks and companies to buy Bitcoin, which seems like the opposite of the original intention.

This new idea of crypto is something that an investor gets exposure through by buying a locally listed stock at a huge premium to NAV which is conveniently denominated in their local currency is more than a little bit confusing.

Like I said, if it makes sense to you, feel free to explain it to me in the comment section below.

If you enjoyed this video, you should watch my video on Argentina's memecoin disaster next.

Don't forget to check out our sponsor, Plot Node, using the link in the description.

See you in the next video. Bye.