Global Encryption Concept Stocks Analysis: An Emerging Rise Outside of TradFi

As the global financial regulatory environment becomes clearer, the cryptocurrency market is moving from niche circles towards the mainstream financial system. After Trump's election as president, he showed a positive attitude towards the cryptocurrency industry, promising to adopt friendlier regulatory policies, including establishing a national Bitcoin reserve and encouraging the U.S. to expand Bitcoin mining activities, which boosted market confidence. Against this backdrop, multiple blockchain concept stocks generally rose.

Currently, an increasing number of listed companies have realized the enormous potential of blockchain technology and are incorporating it into their strategic layout. Many blockchain concept stocks are showing strong growth momentum, gaining significant attention and investment in the market. These companies are driving digital transformation and value creation by introducing blockchain technology, gradually becoming important players in the industry.

In recent years, especially with the United States launching cryptocurrency-related ETFs like Bitcoin spot ETF (, the regulatory dividends have marked a deep integration of cryptocurrency with the traditional capital markets. Grayscale ), as a pioneer, has its Bitcoin Trust ( GBTC ) becoming a bridge for traditional investors to enter the crypto market. Data shows that BlackRock's Bitcoin spot ETF ( IBIT ) has reached an asset management scale of $17.243 billion, remaining almost in a net inflow state since the beginning of the year. Meanwhile, Grayscale's Bitcoin spot ETF ( GBTC ) has an asset management scale of $13.659 billion, demonstrating investors' interest and confidence in this emerging asset class.

The current total market capitalization of the cryptocurrency market is approximately $3.2 trillion and can be divided into three main categories by asset class:

1. Bitcoin ( BTC ) Bitcoin, as the core asset of the entire encryption market, currently has a market value of approximately $1.9 trillion, accounting for more than 50% of the total cryptocurrency market value. It is not only recognized as a store of value by both TradFi and the native cryptocurrency community, but also due to its anti-inflation characteristics and limited supply, it has become the preferred choice for institutional investors, earning the title of "digital gold." Bitcoin plays a key hub role in the encryption market, stabilizing the market while providing an interconnected bridge between traditional assets and native on-chain assets.

2. Native on-chain assets Including public chain tokens ( such as Ethereum ETH), decentralized finance ( DeFi) related tokens, as well as functional tokens in on-chain applications, etc. This field is diverse and highly volatile, with its market performance driven by technological updates and user demand. The current market capitalization is approximately $1.4 trillion, which is actually far below the market's expected high rise.

3. The combination of traditional assets and encryption technology This field encompasses on-chain real-world asset tokenization, emerging projects such as blockchain-based securitized assets, and more. Currently, its market value is only a few hundred billion dollars, but as blockchain technology becomes more widespread and deeply integrated with TradFi, this area is rapidly developing. By tokenizing traditional assets to enhance liquidity, this is also one of the main driving forces behind the rise of the future encryption market. This segment will drive the transformation of TradFi towards a more efficient and transparent digital direction and unleash enormous market potential.

( Why are we so optimistic about the rise potential of traditional assets?

In the past six months, the asset attributes of Bitcoin have undergone a new evolution, and the dominant forces in the capital market have completed the transition from old powers to new funding sources.

In 2024, cryptocurrency's position in the TradFi sector is further consolidated. Financial giants including BlackRock and Grayscale have launched exchange-traded products for Bitcoin and Ethereum, providing both institutional and retail investors with more convenient channels for digital asset investment, which further confirms the connection with traditional securities.

At the same time, the tokenization trend of real-world assets ) RWA ( is also accelerating, further enhancing the liquidity and coverage of financial markets. For example, the German state development bank KfW issued two digital bonds totaling 150 million euros in 2024 using blockchain technology. These bonds are settled through distributed ledger technology ) DLT ###. French computer equipment manufacturer Metavisio issued corporate bonds, using tokenization to provide capital support for its new manufacturing facility in India, which also demonstrates that traditional financial institutions are leveraging blockchain technology to optimize operational efficiency, and many financial institutions have integrated encryption technology into their business models.

Today, a fund circulation model centered around Bitcoin as the core asset, utilizing ETFs and the stock market as the main channels for capital inflow, and leveraging U.S. listed companies like MSTR as the carrying platform, is continuously absorbing USD liquidity and expanding comprehensively.

The combination of TradFi and blockchain will create more investment opportunities than native on-chain assets. Behind this trend reflects the market's emphasis on stability and practical application scenarios. The traditional financial market has a solid infrastructure and mature market mechanisms, and after integrating blockchain technology, it will unleash greater potential.

This research report will briefly analyze the rise model of blockchain concept stocks, especially the way it combines with on-chain assets, to uncover more innovative investment opportunities. For example, MSTR's issuance model showcases a typical path of exchanging on-chain assets for USD assets through convertible bonds and stock issuance. Recently, MSTR's stock price has surged rapidly alongside the rise in Bitcoin prices, and the yield on its convertible bonds maturing in 2027 has reached a three-year high, a strategy that has allowed its stock performance to far exceed that of traditional tech stocks.

From these perspectives, it can be seen that the future development of the encryption market is not only about the rise of digital currencies themselves, but also the enormous potential of integration with TradFi. From regulatory dividends to changes in market structure, blockchain concept stocks are at a critical juncture of this major trend, becoming the focal point of global investors' attention.

Classification of Blockchain Concept Stocks

( 1. Asset-Driven Concept

Regarding the concept of asset allocation in blockchain stocks, the company's strategy is to use Bitcoin as the primary reserve asset. This strategy was first implemented by MicroStrategy in 2020 and quickly attracted market attention. This year, other companies such as the Japanese investment firm MetaPlanet and the Hong Kong-listed company Boyaa Interactive have also joined in, with the acquisition of Bitcoin continuously increasing. MetaPlanet announced the introduction of the key performance indicator "Bitcoin Yield")BTC Yield( established by MicroStrategy, with its third quarter BTC Yield at 41.7%, and by the fourth quarter) as of October 25,### reaching as high as 116.4%.

Specifically, the strategy of companies like MicroStrategy is to introduce "Bitcoin yield" as a key performance indicator, providing investors with a new perspective to assess company value and investment decisions. This metric is based on the diluted number of shares outstanding and calculates the number of Bitcoins held per share, disregarding Bitcoin price fluctuations, and aims to help investors better understand the company's actions of purchasing Bitcoins through the issuance of additional common stock or convertible instruments, focusing on measuring the balance between the rise in Bitcoin holdings and equity dilution. As of now, MicroStrategy's Bitcoin investment yield has reached 41.8%, indicating that the company has successfully avoided excessive dilution of shareholder interests while continuously increasing its position.

However, despite MicroStrategy's significant achievements in Bitcoin investment, the company's debt structure has still drawn market attention. It is reported that MicroStrategy's current total outstanding debt is $4.25 billion. During this period, the company financed through multiple rounds of issuing convertible bonds, some of which also come with interest payments. Market analysts are concerned that if Bitcoin prices drop significantly, MicroStrategy may need to sell some Bitcoin to repay its debt. However, there are also opinions that, due to MicroStrategy relying on its stable TradFi software business and low interest rate environment, its operating cash flow is sufficient to cover debt interest, so even if Bitcoin prices plummet, it is unlikely to force the company to sell its Bitcoin assets. In addition, MicroStrategy's stock market value currently reaches $43 billion, and the proportion of debt in its capital structure is relatively small, which further reduces the liquidation risk.

Despite many investors being optimistic about the company's firm Bitcoin investment strategy, believing it will bring substantial returns to shareholders, some investors are concerned about its high leverage and potential market risks. Due to the extreme volatility of the cryptocurrency market, any unfavorable market changes could significantly impact the asset value of such companies, and their stock prices are trading at a significant premium relative to their net asset value, which raises questions about the sustainability of this situation. If the stock price experiences a correction, it could affect the company's ability to finance, subsequently impacting its future Bitcoin purchasing plans.

(# 1、Microstrategy)MSTR(

MicroStrategy was founded in 1989, initially focusing on the field of business intelligence and enterprise solutions. However, starting in 2020, the company transformed into the world's first and only publicly traded company to use Bitcoin )BTC### as a reserve asset, a position that made it the largest cryptocurrency exchange by trading volume in the United States, while also attracting many institutions to choose it as their preferred platform for custodial crypto assets. Founder Michael Saylor played a key role in driving this transformation, evolving from an early Bitcoin skeptic to a staunch supporter of cryptocurrency.

Since 2020, MicroStrategy has continuously purchased Bitcoin through self-funded capital, bond financing, and other means. As of now, the company has accumulated approximately 279,420 Bitcoins, with a current market value of nearly $23 billion, accounting for about 1% of the total Bitcoin supply. The most recent purchase occurred between October 31 and November 10, 2023, acquiring 27,200 Bitcoins at an average price of $74,463. The average holding price of these Bitcoins is $39,266, while the current Bitcoin price has reached approximately $90,000, resulting in a paper profit for MicroStrategy of nearly 2.5 times.

Despite facing a book loss of about $1 billion during the 2022 bear market, MicroStrategy never sold its Bitcoin but instead chose to increase its holdings. Since 2023, the strong rise of Bitcoin has significantly boosted MicroStrategy's stock price, with a year-to-date return on investment reaching 26.4% and a cumulative ROI exceeding 100%. MicroStrategy's current business model can be seen as a "BTC-based cyclical leverage model," which funds the purchase of Bitcoin through bond issuance. Although this model brings high returns, it also carries certain risks, especially during periods of severe Bitcoin price fluctuations. According to analysis, the Bitcoin price would need to drop below $15,000 for the company to potentially face liquidation risk, and with the current Bitcoin price nearing $90,000, this risk is very low. Additionally, the company's leverage ratio is low, and the demand in the bond market is strong, further enhancing MicroStrategy's financial stability.

For investors, MicroStrategy can be seen as a leveraged investment tool in the Bitcoin market. With expectations of a steady rise in Bitcoin prices, the company's stock has significant potential. However, one must be cautious of the medium to long-term risks posed by debt expansion. In the next 1 to 2 years, the investment value of MicroStrategy remains worthy of attention, especially for investors optimistic about the prospects of the Bitcoin market; this is a high-risk, high-reward asset.

(# 2、Semler Scientific)SMLR(

Semler Scientific is a company focused on medical technology, and one of its innovative strategies is to use Bitcoin as a primary reserve asset. In November 2024, the company disclosed that it recently purchased 47 Bitcoins, raising its total holdings to 1,058 coins, with a total investment amount of approximately $71 million. Part of the funding for these acquisitions comes from operating cash flow, indicating that Semler is attempting to strengthen its asset structure through Bitcoin holdings, positioning itself as a representative of innovation in asset management.

However, Semler's core business still focuses on its QuantaFlo device, which is primarily used for diagnosing cardiovascular diseases. However, Semler's Bitcoin strategy is not just a financial reserve; in the third quarter of 2024, the company achieved an unrealized gain of $1.1 million from its Bitcoin holdings. Despite a 17% year-over-year decline in revenue for that quarter, it still provided Semler with a financial hedge during economic fluctuations.

Although Semler's current market capitalization is only $345 million, which is far lower than MicroStrategy, its strategy of adopting Bitcoin as a reserve asset has led investors to view it as a "mini MicroStrategy."