Blockchain Concept Stocks: A New High Ground for Liquidity Outside the Crypto World

As the global financial regulatory environment becomes clearer, the cryptocurrency market is moving from a niche circle to the mainstream financial system. Recently, Trump's election as president has had a positive impact on the cryptocurrency industry, promising to adopt friendlier regulatory policies, including the establishment of a national Bitcoin reserve and encouraging the expansion of Bitcoin mining activities in the United States. These promises have boosted market confidence. In the following days, there was a widespread transmission in the capital market, with multiple Blockchain concept stocks experiencing a surge.

Currently, an increasing number of listed companies have realized the immense potential of Blockchain technology and are actively incorporating it into their strategic layout. Many Blockchain concept stocks are experiencing strong growth and have gained significant attention and investment in the market. These companies are promoting digital transformation and value creation by introducing Blockchain technology, gradually becoming important players in the industry. Their performance in the capital market is becoming increasingly impressive, and they are expected to encounter greater development opportunities in the future driven by Blockchain.

In recent years, especially with the regulatory dividends brought by the launch of cryptocurrency-related ETFs in the United States, it signifies that cryptocurrencies are no longer confined to a closed digital currency market but are deeply integrated with traditional capital markets. As a pioneer, Grayscale's Bitcoin Trust has become a bridge for traditional investors to enter the crypto market. Data shows that BlackRock's Bitcoin spot ETF has reached an asset management scale of $17.243 billion, remaining in a state of net inflow almost since the beginning of the year. Meanwhile, Grayscale's Bitcoin spot ETF has an asset management scale of $13.659 billion, demonstrating investor interest and confidence in this emerging asset class.

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

1. Bitcoin ( BTC ) Bitcoin, as the core asset of the entire crypto market, currently has a market capitalization of approximately $1.9 trillion, accounting for over 50% of the total market capitalization of cryptocurrencies. It is not only recognized as a store of value by both traditional finance and the native crypto world, but also due to its anti-inflation characteristics and limited supply, it has become the preferred choice for institutional investors, being dubbed "digital gold." Bitcoin plays a key hub role in the crypto 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 has a wide variety of types and high volatility, with market performance driven by technological updates and user demand. The current market capitalization is about 1.4 trillion USD, which is actually far lower than the market's expected high growth.

3. The combination of traditional assets and crypto technology This field covers emerging projects such as the tokenization of on-chain real-world assets ( RWA ), and blockchain-based securitized assets. Currently, its market capitalization is only a few hundred billion dollars, but with the popularization of blockchain technology and the deep integration with traditional finance, this field is developing rapidly. By tokenizing traditional assets and enhancing liquidity, it is also one of the main driving forces for the growth of the future crypto market. This part is full of potential and is expected to drive the transformation of traditional finance towards a more efficient and transparent digital direction, unleashing enormous market potential.

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

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

In 2024, the position of cryptocurrency in the traditional financial sector will be further consolidated. Financial giants, including BlackRock and Grayscale, have launched exchange-traded products for Bitcoin and Ethereum, providing more convenient investment channels for institutional and retail investors in digital assets, further confirming the connection with traditional securities.

At the same time, the trend of tokenization of real-world assets ( RWA ) is also accelerating, further enhancing the liquidity and coverage of financial markets. For example, Germany's state-owned 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 ). The French computer equipment manufacturer Metavisio issued corporate bonds, using tokenization to provide capital support for its new manufacturing facility in India. This also shows that traditional financial institutions are leveraging Blockchain technology to optimize operational efficiency, and many financial institutions have already integrated crypto technology into their business models.

Today, a capital circulation model centered on Bitcoin, using ETFs and the stock market as the main channels for capital inflow, and leveraging some U.S. listed companies as the carrying platforms, is continuously absorbing USD liquidity and unfolding comprehensively.

The combination of traditional finance and Blockchain will create more investment opportunities than native on-chain assets. Behind this trend is a reflection of the market's emphasis on stability and practical application scenarios. The traditional financial market has a solid infrastructure and mature market mechanisms, and when combined with Blockchain technology, it will unleash greater potential.

This research report will briefly analyze the growth model of blockchain concept stocks, particularly how they combine with on-chain assets, in order to uncover more innovative investment opportunities. For example, some companies' issuance models demonstrate a typical path of exchanging on-chain assets for US dollar assets through convertible bonds and stock issuance. Recently, the stock prices of some companies have surged rapidly alongside the rise in Bitcoin prices, with their convertible bond yields hitting a three-year high; this strategy has allowed their stocks to perform far better than traditional tech stocks.

From these perspectives, it can be seen that the future development of the crypto market is not just about the incremental increase of digital currencies themselves, but also the enormous potential for integration with traditional finance. From regulatory dividends to changes in market structure, Blockchain concept stocks are at a key 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) set by MicroStrategy, with its third quarter BTC Yield at 41.7% and the fourth quarter ( reaching as high as 116.4% as of October 25, ).

Specifically, the strategy of companies like MicroStrategy is to introduce the "Bitcoin Yield" key performance indicator to provide investors with a new perspective for evaluating the company's value and investment decisions. This indicator is based on the diluted number of circulating shares, calculating the amount of Bitcoin held per share, without considering Bitcoin price fluctuations. It aims to help investors better understand the company's behavior of purchasing Bitcoin through the issuance of additional common shares or convertible instruments, focusing on measuring the balance between the growth of Bitcoin holdings and equity dilution. As of now, MicroStrategy's Bitcoin investment yield has reached 41.8%, indicating that the company has successfully increased its holdings while avoiding excessive dilution of shareholder interests.

However, despite MicroStrategy's significant achievements in Bitcoin investment, the company's debt structure has still attracted market attention. It is reported that MicroStrategy's current total outstanding debt amounts to $4.25 billion. During this period, the company has financed through multiple rounds of convertible bond issuance, some of which also come with interest payments. Market analysts are concerned that if Bitcoin prices fall significantly, MicroStrategy may need to sell some Bitcoin to repay its debt. However, there are also views that, due to MicroStrategy's reliance on its stable traditional software business and low-interest rate environment, its operating cash flow is sufficient to cover debt interest, so even if Bitcoin prices crash, it is unlikely to force the company to sell its Bitcoin assets. Additionally, MicroStrategy's stock market value currently stands at $43 billion, with debt accounting for a relatively small proportion of its capital structure, which further reduces liquidation risk.

Although many investors are 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 adverse market changes could have a significant impact on the asset value of such companies, and there is a significant premium of their stock price relative to their net asset value, whether this status can be sustained is a focal point of market attention. If the stock price experiences a pullback, it may affect the company's ability to finance, which in turn could impact 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 publicly traded company to use Bitcoin (BTC) as a reserve asset, a strategy that fundamentally changed its business model and market position. Founder Michael Saylor played a key role in driving this transformation, shifting from an early Bitcoin skeptic to a staunch supporter of cryptocurrency.

Since 2020, MicroStrategy has been continuously purchasing Bitcoin through its own funds and bond financing. 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 bear market in 2022, MicroStrategy has never sold any Bitcoin, instead choosing to continue accumulating. The strong rise in Bitcoin since 2023 has significantly boosted MicroStrategy's stock price, with a year-to-date return on investment reaching 26.4% and a cumulative return exceeding 100%. MicroStrategy's current business model can be seen as a "BTC-backed cyclical leverage model," raising funds through issuing bonds to purchase Bitcoin. While this model brings high returns, it also carries certain risks, especially during periods of extreme Bitcoin price volatility. According to analysis, Bitcoin's price would need to fall below $15,000 for the company to potentially face liquidation risks, and with the current Bitcoin price nearing $90,000, this risk is minimal. Additionally, the company's leverage is low, and the bond market demand is strong, which further enhances MicroStrategy's financial stability.

For investors, MicroStrategy can be seen as a leveraged investment tool in the Bitcoin market. With the expectation of a steady rise in Bitcoin prices, the company's stock holds 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, as it represents 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 has recently acquired 47 Bitcoins, increasing its total holdings to 1,058 coins, with a total investment amount reaching approximately $71 million. Part of the funds for these acquisitions came from operating cash flow, indicating that Semler is attempting to strengthen its asset structure through Bitcoin holdings, becoming a representative of innovation in asset management.

However, Semler's core business still focuses on its QuantaFlo device, which is mainly used for diagnosing cardiovascular diseases. Nevertheless, 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, providing a financial hedge for Semler amid economic fluctuations, despite a 17% year-on-year decline in revenue for that quarter.

Despite Semler's current market capitalization of only 345 million USD.