Hi readers, In today's newsletter, Leo Mindyuk of ML Tech posits that while the crypto market will be negatively impacted in the short-term by increased volatility in global trade, it will fare better over time than traditional finance. Then, Brandon Turp of Next Layer Capital says that holding bitcoin on corporate balance sheets represents more than a trend — it's a transformation in how companies can create and preserve shareholder value.
Thanks for joining us. |
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Why DeFi Will Benefit From Trade Wars |
Bitcoin (BTC) tumbled over the weekend, sinking well below the $100K mark as markets reacted to the latest escalation in the U.S. trade disputes. The broader digital asset market followed suit, leading to one of the most significant sell-offs since the outbreak of Covid and the collapse of FTX. Specifically, President Donald Trump announced sweeping new tariffs of 25% on imports from Canada and Mexico and 10% on Chinese goods. Canada and Mexico initially retaliated but have since reached deals to delay the imposition of U.S. tariffs, while China has announced its own tariffs against U.S. goods. The developments have increased global economic uncertainty and sent risk assets into a temporary free fall. As global economies wrestle with trade disputes, crypto markets face ripple effects in the form of price volatility, mining disruptions and regulatory challenges. But could these tensions also fuel the rise of decentralized finance? Let's explore how tariff wars could shape the future of crypto. BTC's reaction to tariff announcement |
Market volatility: a double-edged sword Tariff wars create uncertainty in traditional markets, often driving investors toward alternative assets like bitcoin, ether and other cryptocurrencies. During economic turbulence, crypto is sometimes seen as a "safe haven" similar to gold. However, even as institutional adoption of crypto grows, digital assets remain highly speculative. In the short term, the crypto market will be negatively impacted by increased volatility in global trade, with sudden surges or dips influenced by shifting trade policies — but over time, crypto will be less impacted than traditional finance. Mining disruptions Crypto mining relies heavily on specialized hardware, much of which is produced in countries like China. Tariffs on electronic components, semiconductors and mining rigs can drive up production costs and reduce profitability. Additionally, increased expenses could push smaller miners out of the market, potentially leading to greater centralization of mining power among major players with the resources to weather these financial storms. Regulatory uncertainty and compliance hurdles Tariff wars don't just impact physical goods; they can also influence financial regulations. Governments engaged in tariff wars may use financial regulations as an additional tool to assert control. Increased scrutiny of international crypto transactions, exchanges and cross-border payments could lead to stricter compliance requirements. This, in turn, could slow adoption rates and make crypto less accessible, particularly in regions where trade restrictions are tightening. At the same time, heightened regulations may push some users deeper into decentralized finance (DeFi) platforms, which operate outside traditional banking systems. Shift towards decentralized finance (DeFi) As trade conflicts heighten distrust in traditional financial systems, decentralized finance (DeFi) may offer users a way to bypass some of the barriers imposed by tariffs and regulations. More users may turn to DeFi platforms for financial autonomy. DeFi applications allow for peer-to-peer transactions without intermediaries, reducing reliance on traditional banking, which is often impacted by trade policies. If tariff wars continue to disrupt traditional trade channels, crypto-based financial solutions could see increased adoption. Conclusion While crypto is often seen as a hedge against economic instability, it is not immune to the effects of tariff wars. From increased volatility and mining costs, to regulatory shifts and the potential rise of DeFi, the trade conflicts of today could shape the digital economy of tomorrow. While crypto may face new hurdles in the short term, it will emerge stronger in the long term as global markets seek an alternative to traditional finance amidst global governments' ongoing economic battles. Investors, miners and policymakers should keep a close eye on trade developments as they navigate the complex relationship between geopolitics and digital assets. |
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The Great Accumulation: A Corporate Race for Bitcoin |
For decades, corporate treasuries have relied on cash, bonds and short-term investments to preserve capital. But inflation, devaluing fiat currencies and near-zero interest rates have challenged this approach. A new dark horse is emerging and corporate finance is about to change forever. BTC as a corporate reserve asset Historically, corporations have kept substantial cash reserves for both stability and liquidity. However, as Michael Saylor, Executive Chairman of MicroStrategy has argued, cash is like a melting ice cube — losing its purchasing power due to monetary debasement. Bitcoin offers an alternative: an asset with a fixed supply, global liquidity and asymmetric upside. Since 2020, MicroStrategy has aggressively accumulated bitcoin, transforming its corporate balance sheet into a quasi BTC bank. The company issues convertible debt and equity to fund its purchases, leveraging a traditional finance approach to building a bitcoin treasury. In 2024 alone, MicroStrategy acquired 257,000 BTC. This strategy has indirectly turned MicroStrategy into a publicly traded bitcoin ETF and accumulation machine, granting shareholders exposure to BTC through its publicly traded stock $MSTR. Two key metrics: bitcoin per share & BTC yield Microstrategy has popularized two key metrics every corporation studying this strategy needs to understand intimately: bitcoin per share (BPS) and BTC yield. Bitcoin per share (BPS): The number of bitcoin held per outstanding share. This metric allows investors to measure a company's indirect BTC exposure. BTC yield: The percentage change in the number of bitcoin per share over time. This KPI attempts to reflect how efficiently a company acquires BTC. |
The corporate supercycle While many corporations maintain traditional treasury strategies, a fundamental shift in corporate finance is emerging. Over 70 publicly traded companies now hold bitcoin on their balance sheets, including Tesla, Coinbase and Block. Even companies outside the technology and finance sectors are adopting this approach, demonstrating its broad applicability across industries. |
This adoption represents more than a trend — it's a transformation in how companies can create and preserve shareholder value. The regulatory environment is evolving to support this shift in three critical ways: |
- SAB21's reversal has fundamentally enhanced bitcoin's utility as a treasury asset. By enabling regulated financial institutions to provide custody services, corporations can now leverage their bitcoin holdings more efficiently through established banking relationships.
- The FASB's landmark accounting changes create a more accurate reflection of bitcoin's economics on corporate financial statements. Under these rules, companies accumulating bitcoin can now recognize appreciation in their earnings statements, providing a clear mechanism for value creation through strategic bitcoin acquisition.
- The proposed Bitcoin Act 2024 and broader regulatory clarity signal growing institutional acceptance, reducing systemic risks for corporate adoption.
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Companies can now generate earnings growth through strategic bitcoin accumulation while simultaneously building a position in an asset with significant potential for appreciation. This combination of current earnings impact and future value potential echoes classic Warren Buffett principles of finding businesses that can both generate current returns and reinvest capital at attractive rates. The transformation ahead isn't merely about adding bitcoin to balance sheets — it's about fundamentally rethinking corporate treasury management for an era of digital scarcity. Companies that understand this shift early will have a significant advantage in building treasury positions at attractive prices, much like early internet adopters. We're entering a new era in corporate finance, where bitcoin's unique properties combine with evolving financial infrastructure to create unprecedented opportunities for value creation and preservation. The companies that recognize and act on this shift early will likely emerge as the Berkshire Hathaways of the digital age. |
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