Encryption giant rise limit: The financing model and profit analysis behind the 100 billion market capitalization

In the Crypto Assets industry, only two companies have surpassed a market capitalization of 100 billion USD, which may hint that the market capitalization ceiling of the industry is starting to emerge. If we take a well-known pharmaceutical company in the US stock market as a reference, its 140 billion USD market capitalization and 4 billion USD quarterly profit may represent the future rise limit of these crypto companies.

Once one of the most profitable exchanges in the world, with a quarterly profit of up to $3 billion at the time of its listing, its market capitalization once exceeded $100 billion. Meanwhile, another company has financed the acquisition of Bitcoin by continuously issuing bonds, currently holding over 330,000 coins, accounting for about 1.5% of the total Bitcoin supply, with a holding value of $33 billion.

Some analyses suggest that the company's core model views long-term debt as profit on the balance sheet rather than generating cash flow. This well explains why its stock price has risen significantly.

Assuming both companies raised $1.2 billion, one for purchasing Bitcoin and the other for investing in mining machines. When the price of Bitcoin rises from $50,000 to $100,000, the former nets $1.2 billion through its investment in Bitcoin, but this is unrelated to the company's business cash flow and is considered unrealized profit. Including the previously accumulated Bitcoin, the actual profit for the year exceeded $15 billion.

In contrast, the latter's $1.2 billion investment in mining, although costly, has a payback period of one year for the mining machines, which translates to a monthly cash flow of $100 million thereafter.

Therefore, the same $1.2 billion investment's profit for the former depends on the price of Bitcoin, while the profit for the latter depends on the duration of Bitcoin. This is also the core reason why funds may flow from the former to mining stocks when Bitcoin reaches $100,000. As long as the price of Bitcoin remains at $100,000 and the computing power scale remains unchanged, the longer the duration, the higher the accumulated profit.

As the price of Bitcoin rises, the marginal effect of purchasing Bitcoin through financing decreases. If the price of Bitcoin has already reached $100,000, refinancing $1.2 billion becomes more difficult, and the rise in Bitcoin may only be 20%, which would significantly reduce profits to $240 million.

The price of Bitcoin has limited room for growth, which restricts the potential for increasing Bitcoin purchases through financing. As the price of Bitcoin rises, the ability to finance will also be limited, so the seemingly infinite upward momentum of the flywheel, with the left foot stepping on the right foot, also has its limits, making it difficult for financing to be sustained.