The Breakdown - Who Can Out-Saylor Saylor?

Episode Date: May 29, 2025

Trump Media, GameStop, Joe Lubin, and a growing list of others are embracing the Michael Saylor playbook—raising massive capital to load up on Bitcoin. Today on The Breakdown, NLW unpacks the explosion of MicroStrategy-style public vehicles, the reflexive loop driving investor FOMO, and whether this leverage injection is a new frontier for Bitcoin-based finance—or a looming gray swan. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Wednesday, May 28th, and today we are talking about the latest micro-strategy clone from a fairly interesting source. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link of the show notes or go to bit.ly slash breakdown pod. Well, friends, the big question of the moment is this. Are the micro strategy clones a bubble that will bring down the Bitcoin market, or are they a new dawn for Bitcoin-based finance?

Over the past few months, we've seen a huge number of Bitcoin treasury companies come to market. Metaplanet started the trend last December, taking a zombie Japanese hotel chain and turning it into a leveraged Bitcoin holding company. The pace, however, has really picked up recently, with GameStop, a Neutral, a Necess, joint venture between Tether SoftBank and Cantor Fitzgerald and a new vehicle from Bitcoin magazine CEO David Bailey, all adopting the Michael Saylor Playbook. The news this week is that Trump Media Group, the parent company of Truth Social, is also becoming a leveraged Bitcoin vehicle.

After calling the Financial Times dumb, their word, for reporting the scoop on Monday, the company announced they would raise $2.5 billion to buy Bitcoin. The fundraise will include $1.5 billion in equity alongside $1 billion in convertible notes. The notes are offered at a conversion price equivalent to a 35% premium, making them extremely attractive to traders in that market. Basically, almost a direct copy of the Michael Saylor plan. CEO and Chairman Devin Nunes said, We view Bitcoin as an apex instrument of financial freedom, and now Trump Media will hold cryptocurrency as a crucial part of our assets.

Our first acquisition of a crown jewel asset, this investment will help defend our company against harassment and discrimination by financial institutions, which plague many Americans and U.S. firms, and will create synergies for subscription payments, a utility token and other planned transactions across Truth, Social, and Truth Plus. Hold aside all those future plans, and the point is this. President Trump now has his own micro-strategy clone. Or, I suppose, more accurately, the blind trust controlled by the president's children has a substantial stake in a multi-billion dollar micro-strategy clone. Yesterday, we covered the growing controversy around the president's crypto activities,

including the early reporting of this news. Today, though, we're unpacking how large this segment is growing and taking a pulse on how people are viewing the longevity of this trend. Let's start by taking a look at how fast this strategy is proliferating across public markets. Trump Media Group was just one of numerous stories about new crypto treasury companies just from yesterday. Vivek Ramoswamy's drive capital has closed $750 million in private equity funding to buy Bitcoin. The firm is looking to engage in alpha strategies with the aim of outperforming. One of their plans is to look at acquiring Mount Cox claims that remain unpaid. In French markets, a consulting firm called the Blockchain Group,

said it completed $72 million in convertible debt issuance to bring. purchase more Bitcoin as well. The company plans to purchase 590 BTC, which would add 50% of their holdings. The group said that while it, quote, pursues its Bitcoin accumulation strategy, it will continue to develop the operational activities of its subsidiaries. The company had around $15 million in revenue last year for a $1.5 million profit, so their numbers are at least in the black. But the point here is that there are now companies that no one has ever heard of, levering up to buy Bitcoin, and at this point increasingly too many to keep track of. One big new play comes from Consensus founder and early Ethereum backer Joe Lubin.

Lubin is leading a $425 million private equity deal with betting platform Sharplink gaming. He plans to turn the company into an Ethereum-based spin on the Bitcoin Treasury strategy. The investment is backed by a long list of prominent cryptoVCs, including Parify, Electric Capital, Pantera, Arrington Capital, and Galaxy Digital. Sharplink itself is little more than an SEC registration and a NASDAQ ticker. The company had $3.6 million in revenue last year and made a $4.4 million loss. The stock was up more than 400% in premarket trading following the announcement. Vance Spencer of Framework Ventures has been calling for consensus to go public and commence the

ETH strategy for weeks. Yesterday, he tweeted, Joe Lubin is that guy. Andrew Thurman of Gito Labs introduced a nagging thought for Ethereum holders, however, commenting, what are the odds that the Lubin micro strategy is him dumping his bags into the company and not buying off the open market? Another interesting story that shows where we are in this hype cycle involves Metaplanet. A report published by 10x research showed the stock is currently trading for a five, 500% premium of their Bitcoin treasury. Micro Strategy by comparison is currently at around a 60% premium.

Now, Metaplanet has a few unique factors to justify a higher premium. Their presence in the Japanese market presents a tax efficiency angle for local investors. Gains in public stock investments are only taxed at 15%, while Bitcoin gains are taxed as regular income at rates up to 55% in the top bracket. The company is also growing their Bitcoin treasury at a rapid clip. They added 95% to their Bitcoin holdings in Q1, and have added another 45% so far this. quarter. Micro Strategy would need to deploy around 30 billion this quarter to grow at the same pace. It's a big ask for investors to pay up to $600,000 per Bitcoin, currently held in Metaplanet's Treasury, but it seems many are willing to do so. Dylan LeClair, who's running that Treasury strategy,

noted the stock had the second highest volume in Japan on Monday and the fourth largest value traded. They're currently a more actively traded stock than companies like Sony, Toyota, or even SoftBank. And then just this morning, we got news that GameStop had purchased 4,710 Bitcoin, their first Bitcoin purchase, again suggesting that this is a trend that is still very much heating up. And yet, over the past few years, micro-strategy skeptics have spent an inordinate amount of time sketching out how the story will end. Most settle on some variation of Bitcoin price dropping, the debt getting called, and the

firm being forced to liquidate. This, of course, isn't anywhere close to how micro-strategy's financing works. The debt isn't callable like a margin loan for futures trading would be. Instead, it's structured with defined maturity stretching out for several years. Therefore, the risk is simply that capital markets will lose confidence in the company and refuse to roll over the debt. At the moment, it doesn't seem like a big risk, but some recent comments from Michael Saylor don't exactly inspire confidence. In an appearance at a side event at Bitcoin 2025 this week, Saylor was asked why he doesn't publish on-chain proof of reserves.

He responded that, quote, the current conventional way of publishing proof of reserves is insecure. It actually dilutes the security of the issuer, the custodians, the exchanges, and the investors. It's not a good idea. It's a bad idea. It's like publishing the address and the bank accounts of all your kids and your phone numbers of all your kids, and then thinking somehow that makes your family better. It doesn't make your family better. So no institutional greater enterprise security analysts would think it's a good idea to publish all of the wallet addresses such that you can be traced back and forth and every future transaction can be traced.

And while there is a certain logic to the point, especially with micro strategy actively trading the market, at the same time, passive holders like the Bitwise ETF have published their wallet addresses to provide peace of mind to investors. Now, people did not like this. Crypto lawyer Gabriel Shapiro commented, This is suspicious and worrisome. As an Exchange Act reporting company, they have a lot of auditors on them, so it's probably still reasonably low risk, but we've seen in the past that's not a guarantee against shenanigans.

Kobe tweeted, meanwhile, it's actually great if he doesn't have all the Bitcoins, which is certainly a take. Beyond micro-stratities risk of failure, however, the larger question is whether the whole trend is sustainable. There are plenty in the camp that this is simply the optimal way to express a view on the strength of Bitcoin against fiat currencies. Blockstream CEO Adam Back tweeted,

Micro Strategy and other Treasury companies are an arbitrage of the dislocation between the Bitcoin future in today's fiat world, a sustainable and scalable $100 to $200 trillion trade, front-running hyper-bitcoin ization, scalable enough for most big-listed companies to move to Bitcoin Treasury. Others think the equilibrium is a little more reliant on investor confidence. Endowment asset manager, Manage Vasudevan wrote, 3.3 is a concept rooted in game theory and inspired by the prisoner's dilemma, where everyone cooperates to maximize the collective benefit, popularized by Olympus Dau, it symbolizes aligned incentives, long-term thinking, and win-win behavior.

Micro Strategy is 3.3. If you weren't around for Olympus Dow, the basic lesson was that one three-coma-3 vehicle where everyone holds is reasonably sustainable. Where it falls apart is when there's dozens of forks of varied quality and confidence from investors. A few weaker versions detonating can bring down the entire house of cards. One point to keep an eye on is that every micro strategy clone needs to up the ante almost by definition. Micro Strategy is aiming to be leveraged around 1.25X, which they're currently undershooting. including. Metaplanet hasn't published a leveraged target, but they're currently very mild at around 1.1x. It seems inevitable we'll see companies trying to catch up to these early plays by turning

up the leverage. During a downturn and forced selling, the over-leverage firms could drag everyone else down with them. Even though the leverage has only started building up, people are already looking towards the end result. Blockworks co-founder Mikey Bolito tweeted, It seems like we found the 2025 equivalent of GBTC. I have no idea if these vehicles will achieve that level of scale and destructive potential, but make no mistake, this is a leverage getting injected into the system. I'm not sure people truly understand how much of a wizard Michael Saylor is. Sailor financed the majority of his Bitcoin buys with converts, so there's plenty of equity risk for investors, but little risk of liquidation. These new acquisition corps won't get

Saylor's terms, and they almost certainly won't be able to raise the capital unsecured. The most likely scenario is that the terms are much worse. There's real liquidation risk, but investors will fomow in because no one reads the fine print and it work for Sailor. It's an extremely reflexive feedback loop that if it gets large enough ends in a 2022-like sell-off. I'm hopeful that if enough people call this out, we can avoid a gray-swan scenario, but I've worked in crypto long enough not to hold my breath. The other Blockworks co-founder Jason Janowitz had additional thoughts, commenting, here's how it's going to go with PCVs public crypto vehicles. Micro Strategy started it. The game was simple. Access capital markets to acquire

Bitcoin, then leverage financial engineering to generate a premium on the underlying BTC. And they nailed it. Say what you want about the guy but sailor is brilliant. What's going to happen is that in the next few weeks and months we'll see PCBs for assets in the top 50. That's when the game gets stupid. But obviously, asset number 47 isn't the same as Bitcoin. For so many reasons, most of these, all won't end well. And even with Bitcoin and Ethan Sol, those will get stupid too. They'll have to differentiate, and the only way to really differentiate will be with leverage. This starts great, and investors seating these will make good money, but retail will eventually get hosed. After reading the threads, Milton Mirrors commented,

Every cycle we have to shoot ourselves in the face, don't we? A couple things are still worth noting. It's not guaranteed that a PCV for asset number 47, which happens to be Ondo, by the way, should blow out micro-strategy in the entire class. The market is theoretically now sophisticated enough to tell the difference between Bitcoin and everything else as evidenced by the wild disparity between ETF flows. The leverage that's building up is also categorically different to the leverage that almost took down the industry in 2022.

That cycle had every crypto firm levering up off a few central points, so once the music stopped, the contagion spread quickly as loans were called in. So far, Micro Strategy and its clones don't have any debt able to be called at will. They only have bonds that have to be rolled by certain dates. The counterparties are also hundreds of different investors scattered across traditional capital markets rather than a handful of crypto entities levering the entire industry up, which is not to say that leverage isn't concerning, especially if the trend gets out of hand. But these micro strategy clones aren't playing in the tiny crypto pond of 2021, where tens of billions in bad debt can take the entire industry down. They're tapping the multi-hundred trillion-dollar global capital market to lever up

their books. Does that mean this leverage can't unwind? Absolutely not, and I have full confidence in the crypto industry to find a way to blow itself up every few years. I will say only that when everyone is hyper-aware of a very specific risk, the actual crisis tends to come from somewhere else entirely. For now though, that is going to do it for today's breakdown. Appreciate you listening, as always, and until next time, be safe and take care of each other. Peace.