jakiro
Author: Zhang Feng
“Crypto-Equity Convergence” generally refers to a listed company that directly or indirectly binds its own value to cryptocurrency assets, trying to build a bridge of value interoperability between the stock market and the cryptocurrency market, thereby achieving multiple goals such as market value management, financing innovation, and brand reshaping.
This model not only gives birth to legendary stories like Tesla, showing its amazing potential as a market capitalization catalyst and strategic layout tool; but it also shows that the effect of currency-stock linkage is not obvious, and even negative impacts are produced and new risks are generated, which is worth everyone’s reflection.Through in-depth analysis of successful cases and multi-dimensional warnings of failed cases, we will provide colleagues from all walks of life with a comprehensive picture and rational thinking about “coin-stock linkage”.
1. Strategic Value and Market Effect
The linkage of currency and stocks is not a simple concept hype. Its successful implementation requires precise strategic design, strong execution and precise control of market sentiment.The case of Tesla and a well-known Hong Kong-listed technology company provides us with two completely different but equally wonderful samples.
Case 1: Tesla – a textbook-style strategic gamble
Tesla, led by Elon Musk, has interpreted the linkage of currency and stocks into a global financial performance art and strategic practice.
(I) Operation path
High-profile entry (February 2021):Tesla publicly disclosed in its SEC filing that it had purchased $1.5 billion worth of Bitcoin and announced that it would accept Bitcoin as a payment method for car purchases.This move instantly ignited two markets.
Market manipulation and expectations management:Musk himself used his huge social media influence to directly influence the prices of related cryptocurrencies by posting remarks supporting Bitcoin and Dogecoin, and then feed back to Tesla’s stock price.His remarks have become an important weather vane in the market.
Partial profit settlement:When the Bitcoin price was high, Tesla sold some positions and achieved considerable quarterly profits, perfectly interpreting the concept of “taking the balance sheet as a profit center”.
Repeat and swing:Since then, the policy on accepting Bitcoin payments has been repeated several times, and Musk’s remarks have also switched between bullish and bearish, and continued to maintain market attention.
(II) Analysis of the motivation for success
Brand image strengthening:Tesla’s brand core is “disruption, innovation, and a sense of futurism.”Embracing cryptocurrency, a cutting-edge asset, is highly consistent with its brand tone, further consolidating its position in the hearts of technology pioneers and young investors.
Excellent market value management:The move to buy Bitcoin is interpreted by the market as Tesla is not only a car company, but also a forward-looking technology investment company.Its stock price and Bitcoin price show a high positive correlation in the short term, attracting a large number of incremental funds that are optimistic about both electric vehicles and cryptocurrencies.
The ultimate use of the founder’s personal IP:Musk is a rare “cross-border Internet celebrity” in the world, and every word he says can be transformed into real money and market fluctuations.This powerful narrative power is a core resource that other companies are difficult to replicate.
Significant financial returns:Bitcoin investment has brought direct high profits, improved the company’s financial report, and provided a funding buffer for its huge R&D investment.
Tesla case proves that when coin-stock linkage is highly coordinated with the company’s core strategy, brand image and founder characteristics, it can release the huge energy of “1+1>2” and achieve multiple harvests of brand, finance and market value.
Case 2: A Hong Kong-listed technology company – a roundabout and exquisite capital operation
Compared with Tesla’s high profile, the currency-share linkage operation of a large technology company listed on the Hong Kong stock market seems more roundabout and sophisticated.
(I) Operation path
Subsidiary layout:The company does not directly purchase cryptocurrencies as the parent company entity, but instead invests on a large scale in multiple mainstream cryptocurrencies and blockchain projects through its subsidiaries and affiliated subsidiaries and investment funds.
Ecological construction and business collaboration:The investment direction is closely related to its core businesses (such as cloud services, games, and social networking).For example, invest in NFT game companies and link with their own game business to layout the metaverse; invest in underlying public chains to provide infrastructure for their future decentralized applications (DApps).
Market expectations guide:By revealing its layout and progress in the blockchain field in the financial report conference call and performance conference, it continues to send positive signals to the capital market and guide investors to reevaluate their growth potential outside of their traditional businesses.
(II) Analysis of the motivation for success
Avoid direct risks:Investing in subsidiaries rather than listed entities isolating to a certain extent the direct impact of violent fluctuations in cryptocurrency prices on the financial statements of listed companies, and it is more flexible and concealed in operation.
Strategic transformation narrative:Faced with the pressure of slowing growth in traditional businesses, the company successfully told a new story of “Web3.0 transformation” through coin-stock linkage.This will help raise the valuation ceiling and attract investors who are optimistic about the next generation of Internet.
Business synergy:Its investment is not purely financial investment, but rather a strategic synergy with existing businesses, aiming to build a future ecosystem.This story of “combination of reality and reality” is more convincing and continuous than simply speculating on currency.
Catering to the regulatory environment:Compared with the United States, some parts of Asia have a more vague attitude towards cryptocurrencies.The company’s roundabout strategy demonstrates its careful consideration of regulatory risks in different jurisdictions.
This case shows that coin-stock linkage does not necessarily need to be as sharp as Tesla. Indirect linkage through ecological investment and business collaboration can also gain the favor of the capital market and pave the way for long-term strategic transformation.
2. Linkage failure and market backlash
However, the road to currency-share linkage is by no means smooth.More companies and investors have suffered tragic failures in the process.These cases sounded a wake-up call for us and revealed the huge risks involved.
(I) MicroStrategy: Financing setbacks and premium shrinkage
As a pioneer of the “Bitcoin Treasury Company” model, Strategy has recently encountered severe tests.In August, the company’s stock price fell 16.8%, significantly weaker than Bitcoin’s 6.15% decline.The core reason for this phenomenon is that its financing plan has been frustrated. Strategy originally planned to raise funds through preferred stocks to buy Bitcoin, but eventually raised only $47 million, far below expectations.
To make up for the insufficient funds, the company had to restart its common stock issuance plan, which directly violated previous commitments to restrict equity dilution.The market responded fiercely because the issuance of additional shares means that the value of each existing shareholder’s shares will be diluted.
Analyst Gus Gala has downgraded MicroStrategy from “neutral” to “sell” in April and maintained this rating on August 21 with a target price of $175.He clearly pointed out that the high volatility of Bitcoin and the balance sheet vulnerability brought by the company’s high leverage purchase of coins are the main risk points.More importantly, the market’s valuation logic for MicroStrategy is changing.When investors can buy bitcoin directly, they are reluctant to pay an additional premium to companies holding bitcoin.
(II) SharpLink Gaming: Panic for equity dilution
SharpLink Gaming, a strategic reserve company in Ethereum.The company, which holds Ethereum worth more than $3 billion, plummeted 72% in a single day after filing with the SEC on June 13.The root of the market panic is that the filing submitted by SharpLink allows specific investors to sell shares, which is seen by retail investors as a precursor to equity dilution.
Although Ethereum co-founder and chairman of SharpLink, Joe Lubin, urgently stepped forward to appease the market, emphasizing that this is “just a standard process for post-financing in the traditional financial field and does not represent actual selling”, and stated that neither the main investors nor him himself had reduced their holdings, market confidence has collapsed.
This case reveals the structural weakness of the currency-share linkage model: investors’ trust in these companies is extremely fragile.Even if the company holds a large amount of cryptocurrency assets, any possible equity dilution behavior can trigger a panic sell-off.
(III) Common mechanism behind failure
These two cases expose three fundamental flaws in the currency-stock linkage model.
Valuation premium depends on market sentiment rather than fundamentals.Most of these companies lack stable main business income and their stock prices rely heavily on market sentiment rather than actual operating performance.
The backlash effect of financing mechanism.The “issuance of stocks and buying coins” model that once pushed up stock prices is being re-examined by the market.When investors realize that continuous issuance of additional stocks will dilute their own rights, selling becomes an inevitable choice.
Business transmission failure.Even if cryptocurrency prices rise, the operating performance of related companies has not improved simultaneously.Taking Coinbase as an example, its transaction revenue in the second quarter fell by nearly 40% month-on-month, and overall revenue fell by 26.4%.This shows that the rise in the currency price has not been effectively converted into the actual operating results of these companies.
3. Reflection and prospect
As a cutting-edge practice of financial innovation, the currency-stock linkage is a powerful “double-edged sword”.The success of Tesla and other cases reveals its huge potential in reshaping the valuation system, innovating financing methods and building ecological synergy, and represents a future-oriented, more flexible and imaginative capital strategy.
However, more failure cases warn us that this road is full of pitfalls of compliance, technology, market, reputation and practice.It is by no means a master key for all companies, and its success depends very much on:
Is it clear strategic purpose?Is it a long-term ecological layout or a short-term stock price speculation?
Are you ready for a strong risk control plan?Can you control the ultimate volatility and technical risks?
Has a mature compliance system been built?How to deal with related compliance risks, including cross-border regulatory coordination?
Is it suitable for the company’s own unique brand?Is it consistent with the company’s inherent image and culture?
For regulators, it is necessary to clarify the regulatory framework as soon as possible, not only protecting investors from fraud and market manipulation, but also leaving room for development for real innovation.For investors, it is necessary to penetrate dazzling narratives and deeply identify the company’s real motivations and risk resistance to avoid becoming a buyer before the bubble burst.
Looking ahead, with the gradual clarity of cryptocurrency regulation, the increasingly mature underlying technology, and the continuous increase in institutional adoption rates, the model of currency-share linkage may become more diverse and standardized.It won’t disappear, it will only evolve.But no matter how the form changes, its core risk-benefit characteristics will not change.Only by maintaining awe and insight into the essence can we move forward steadily in this deep sea full of opportunities and dangers.
