Suddenly, the most eye-catching aspect of the US stock market seems to no longer be AI, but a bunch of companies on the brink of delisting. Over the past few months, the US capital market has been undergoing a unprecedented wave of increasingly large-scale reverse mergers.

Publicly traded companies have completely abandoned their core business, turning cryptocurrency into their fundamental value proposition, causing their stock prices to skyrocket several times or even tens of times within a short period. Now, the US stock market has truly become a playground for the crypto community to conduct financial experiments. This time, crypto VCs have really brought the narrative to Wall Street's ears.

US Stock Market, Where the "Rug Pullers" Set off the Fireworks

Three months ago, when investing in Sharplink, Primitive Ventures had no idea that this new crypto track in the US stock market would become so crowded in such a short time. "At that time, not many people were discussing these investment cases, which cannot be compared to the current market hype, but it was only a month or two," said Yetta, a partner at Primitive.

In June of this year, Sharplink Gaming announced a $425 million funding round, becoming the first Ethereum reserve company in the US stock market. After the news was released, the company's stock price surged, at one point rising by over 10 times. Primitive, as the only Chinese-speaking fund to participate in this investment case, attracted attention in the community.

"We found that the liquidity in the crypto market is not good, but institutional buying power is very strong. The volume of the Bitcoin ETF has been good, and the open interest in Bitcoin options on CME even exceeded that of Binance." In April of last year, Primitive held a major retrospective meeting internally, and since then, they have set a new investment direction of "CeFi (Centralized Finance) and DeFi (Decentralized Finance) Integration." Now, they have become one of the busiest VCs in the crypto community.

Today, Primitive receives emails from investment banks every day, inviting the fund to participate in investments in crypto reserve companies. In this wave of investment, investment banks act as intermediaries, organizing roles responsible for helping the project team find and coordinate all investors, and assisting the team in pitching to potential investors.

In the past month, Primitive has discussed more than 20 cryptocurrency reserve projects. However, the projects they have publicly participated in investing in are only Sharplink and another company that is building a Litecoin reserve, MEI Pharma. This cautious investment approach stems from concerns about the market overheating, and since May of this year, the team has been closely monitoring various top signals.

"We do feel that the current market's bubble level is much higher than it was a few months ago," Yetta told Beat Digital, the team now produces daily market reports, and evaluates the appropriate exit strategies based on the situation. "Crypto reserve companies represent a financial innovation, and you can be long-term bullish on their underlying assets, but there are also risks of severe deleveraging and bubble bursts when the market goes down."

Unlike Primitive, Pantera is rolling up its sleeves and getting ready to make a big move. This well-established crypto VC firm, with 12 years of history, has even coined a new term for the field — DAT (Digital Asset Treasury). In early July, Pantera established a new fund named the DAT Fund.

In the fundraising memo, Pantera partner Cosmo Jiang wrote: "As an investor, it is very rare to find oneself at the starting point of a new investment category, and realizing this and reacting quickly to take advantage of early investment opportunities is crucial."

Pantera's story to investors is very simple: If a company's Bitcoin Per Share (BPS) is growing every year, holding shares of that company will allow you to own more and more Bitcoin over time.

The underlying logic of Bitcoin reserve companies like MicroStrategy and other cryptocurrency reserve companies is to leverage targeted issuances, convertible bonds, preferred shares, and other financial instruments to raise funds from the market when the market value exceeds the book value of their crypto assets, and then acquire more crypto assets. Due to the premium on the stock, the companies can accumulate more assets at a lower cost.

Investors generally use the mNav indicator (Market Cap To Net Asset Value) to measure their premium multiplier to assess the company's financing capability. "Obviously, the stock market is volatile, and sometimes the market overestimates certain assets. At such times, initiating financial tool financing is essentially selling this volatility. From this perspective, the premium can actually be sustained in the long term," Cosmo told DaChan Beating.

In April of this year, Pantera invested in the Solana reserve chain token SOL's Defi Development Corps (DFDV), which became the first US company to use a reserve asset other than Bitcoin. Its stock price has already surged more than 20x in the past 6 months.

However, for Pantera, this was definitely a contrarian investment because no one was willing to invest in the project at the beginning. The company's $24 million funding came almost entirely from Pantera.

Most DFDV members come from the upper echelons of Kraken, with the CFO having operated a Solana validation node. The team's deep understanding of Solana and their level of expertise in traditional finance became key factors that impressed Pantera. "Nevertheless, we still set some downside protection measures in the trading structure, but DFDV's amazing success was something we never expected."

「I believe the real catalyst was Coinbase being included in the S&P 500 Index, which required all fund managers around the world to consider crypto.」 Since Trump's election, the crypto industry has made significant strides in the traditional capital markets, with Circle's IPO drawing global attention to stablecoins, Robinhood entering the RWA space, and securitizing tokenized securities. Now, DAT is becoming the new concept taking the relay.

Less than a month after investing in DFDV, Cantor Equity Partners also came knocking. DFDV's success accelerated SoftBank and Tether's Bitcoin reserve company plan, ultimately leading CEP to raise about $3 billion in external funding, with Pantera once again becoming its largest external investor.

The funds invested in DFDV and CEP come from Pantera's flagship Venture Fund and Liquid Token Fund. The team initially thought these would be the only two investments the fund would make in this area.

However, the market's development quickly surpassed Pantera's expectations. Due to limitations in the investment portfolio framework and concentration of the two funds mentioned above, Pantera quickly decided to establish a new fund.

On July 1st, DAT Fund began fundraising with a target of $100 million. On July 7th, it was officially announced that the fundraising was completed. Due to high LP enthusiasm, Pantera subsequently launched the fundraising for a second DAT Fund. By mid-month, in an interview with Beating, the first DAT Fund's funds had already been fully deployed.

In publicly disclosed investment cases, Pantera often acts as an "Anchor" investor, meaning they contribute the most. Because initial liquidity for DAT companies is relatively low, which can easily lead to discounts, the team needs to bring in heavyweight investors off-exchange first to build a base, ensuring liquidity and narrowing spreads.

On the other hand, the "Anchor Investor" itself is also a strategy for Pantera to push the market. "In the past two months, we have received nearly a hundred proposals from DAT companies. Pantera is usually their first call because we get in early, have cognitive leadership in this field, and they also see that when we invest, we can truly take a big position and are willing to make large investments."

Of course, Pantera doesn't invest in every opportunity that comes along. And for DAT companies, funds also value their ability to create "cognitive leadership" in marketing the market. Its investment in Sharplink and Bitmine is largely based on this consideration. Bitmine was the first investment by DAT Fund, with Pantera also playing an "Anchor" role in the transaction.

On June 2nd, Ethereum community figure Joseph Lubin led the completion of the Sharplink reverse merger, giving birth to the first Ethereum treasury company. On June 12th, Joseph and other Ethereum core members released an Ethereum fundamental report via Etherealize, introducing Ethereum's investment value to institutions.

On June 30th, the second Ethereum treasury company, Bitmine, was established, with "Wall Street crypto expert" Thomas Lee making appearances and starting to frequently appear in mainstream media to interpret Ethereum's investment opportunities. During the same period, Sharplink's stock price began to rise, and the "Ethereum arms race" quickly became the industry's hottest topic.

"To truly open the channel to financial leverage, DAT company's market value needs to reach at least 10 to 20 billion US dollars," Cosmo told Beating Motion. Only at this scale can a company truly receive a valuation premium in the market and open another door to institutional capital through instruments such as convertible bonds or preferred stock.

However, before that, DAT company needs to tell the story to retail investors, not just crypto-native investors, but the broader mainstream retail investor base in the stock market. "To make them understand this story and be willing to participate. The market must first 'believe it will happen' for the entire model to be established."

Building lasting trust with the market is another key factor for DAT company's success. The traditional financial market requires a guarantee of "transparency + discipline," where the team must be sufficiently "Crypto Native" while also having the acumen of traditional finance, managing information disclosure for public companies effectively, understanding the SEC's rules and processes to ensure the company can efficiently and professionally access the US capital market.

"We will spend a lot of time conducting due diligence. The static number of mNav is not truly important. Is there a clear management structure? Can financing be conducted stably? Is there the ability to build a new business model? This is what truly makes an excellent 'DAT entrepreneurial team'."

In addition to Bitcoin, Ethereum, and Solana treasuries, Pantera has recently invested in several other large-cap meme coin treasury companies. From Bitcoin to mainstream tokens to meme coins, the crypto space's narrative to investors has been progressively advancing: compared to Bitcoin, DAT relies entirely on financial engineering for growth, mainstream tokens can generate income through staking and DeFi activities, and meme coin protocols have mature use cases and revenue in the crypto market as fundamentals, allowing stock market investors to gain exposure to growth through DAT.

Compared to the fundraising paths of Bitcoin and mainstream coins, many meme coins receive initial funding directly from the protocol's foundation or its token investors.

The initial reserve of Hyperliquid's strategic reserve company Sonnet BioTherapeutics (SONN) was over 10 million HYPE coins injected into the company directly by a top crypto VC, Paradigm, late last year. According to Dynamic Beating, the establishment of Ethena's strategic reserve company, StablecoinX, was also led by the Ethena Foundation, where PIPE round investors could participate directly using their ENA tokens or USDC.

Due to low liquidity, meme coins often experience a significant surge shortly after fundraising news is announced, providing many insiders with insider trading opportunities. In the case of SONN, the official announcement was made on July 14th, but the price started surging from July 1st and had quadrupled by the night before the news was made public.

Recently, CEA, a BNB reserve company endorsed by YZi Labs, also encountered a similar issue. As per Dynamic Beating, to prevent participants from knowing the company's name in advance, the team purchased several US shell companies in advance and randomly selected one at the last minute. Nevertheless, even with these precautions, there were instances of front-running just hours before the announcement on July 28th.

On the other hand, many investors are also concerned about the potential risks of "washing trading" in meme coin projects. Due to poor liquidity in the crypto market, high market cap tokens with high prices find it challenging to exit without significant slippage. However, by injecting crypto assets into the meme coin company, the token's false liquidity becomes real liquidity in the stock market.

Therefore, whether to "provide growth exposure" or "seek exit liquidity," investors need to carefully discern. "Many meme coins choose to operate in regulatory gaps, such as being listed on low-threshold trading boards. However, this short-term operation makes it difficult to establish stable disclosure and compliance mechanisms. If genuine capital premium cannot be obtained, it's just like passing the buck," one expert commented.

Regulation is also one of the risks that meme coin companies face. Once the SEC categorizes meme coins and other on-chain assets as securities, the structure of these meme coins needs significant adjustments. Nevertheless, players like Primitive and Pantera still believe this is a better battlefield, "because the stock market's liquidity is indeed better, and public equity investors have more protection, so for us, investing in meme coins now is better in terms of win rate and odds compared to pure crypto investments," Yetta said.

Outside of the US Stock Market, the Race for the "Next MicroStrategy" Continues

The US stock market is considered the most efficient, inclusive, and liquid capital market, which is a consensus among investors. If one aims to replicate the next MicroStrategy, Nasdaq remains the best venue. However, this does not mean that other capital markets lack opportunity. Outside of the US stock market, the goal for many is to become the next Metaplanet.

Over the past year, Metaplanet's stock premium has been steadily rising, delivering over a 10x return to investors. This "Asian miracle" breakout success has allowed more people to see the opportunity for regional arbitrage.

The Asian market has been a pioneer in Bitcoin reserves. In mid-2023, Waterdrop Capital partnered with China Taiping Investment Management (Hong Kong) Limited to establish the Pacific Waterdrop Fund, which later invested in Boya Interactive, a Hong Kong-listed company that had just launched a Bitcoin purchase plan. In 2024, MicroStrategy's stock price surged, further confirming this industry trend for Waterdrop. Currently, Waterdrop has invested in five Hong Kong-listed companies and plans to invest in at least 10 by the end of the year.

"It is obvious that the current Bitcoin and mainstream coin reserve companies in the US market are already very crowded, and the next increment is more likely to come from capital markets outside the United States." Nachi, a cryptocurrency trader, is now involved in the wave of reserve company investments. This year, he participated in the investment in Nakamoto Holdings, a Bitcoin reserve company, and quickly received a 10x return.

At the beginning of the year, Nachi invested in Mythos Venture as an individual LP. This fund specializes in "Asian Bitcoin reserves," with his most recent investment being in DV8, a Thai listed company that recently announced the completion of a 241 million Thai baht financing round, becoming Southeast Asia's first Bitcoin reserve company.

Additionally, he has personally participated in several other regional Bitcoin reserve project investments, with most amounts in the seven-figure USD range. For example, he completed the acquisition of Oranje, the first Bitcoin reserve company in Latin America, in April this year. This project received support from Brazil's largest commercial bank, Itaú BBA, and raised nearly $400 million in its first round of financing.

"We believe that markets such as Japan, South Korea, India, and Australia still have room to establish Bitcoin reserve companies." After joining Mythos, Nachi's role has gradually transitioned from an LP to a "quasi GP," searching for investment opportunities along with other members. His task is to find publicly listed companies interested in acquisition, with the "shell owners" in the Asian region becoming the recent focus of Nachi's intensive meetings.

Being the first mover is key to success in capital markets outside of the US stock market. This allows the team to build a first-mover advantage and helps the company capture more market attention. However, this also means that the narrative arbitrage of Bitcoin reserve companies is a race against time.

In the acquisition process, the differences between shell companies are significant, with some companies being acquired for as little as $5 million, while in the case of Thailand's DV8, several parties spent around $20 million.

From acquiring the shell to trading on the market, the entire process usually takes 1 to 3 months, with regulatory approval efficiency being the key variable. However, from identifying opportunities to making things happen, it takes at least 6 months or even longer.

The DV8 acquisition took nearly a year from start to finish, finally completing in July of this year. The main financiers leading this acquisition were UTXO Management and Sora Venture, who are also the key architects behind Metaplanet.

Recently, Sora also planned the acquisition of the South Korean listed software service company SGA. "The Asian, especially Southeast Asian, capital markets are relatively closed, but the volume here is actually very large, it's just that many foreign investors do not understand the activity level of these markets," Sora Ventures partner Luke told Beating.

"Now everyone is racing against time, but in the Asian markets, I think very few can compete with Sora," Luke believes that local regulations are a major barrier for many overseas capital players, with most VCs lacking the experience of complete involvement in acquisitions and communication with regulators, and actually not understanding the Asian markets.

Sora Ventures' strategy is to introduce a large number of local partners to help connect with stock exchanges and regulatory agencies to accelerate the project implementation process. In the case of the South Korean SGA, the team only took less than a month from the start of negotiations to the finalization of the transaction, setting the record for the fastest acquisition in the history of the Korean Stock Exchange.

Company financing pace and market strategy are another barrier. "mNav is a very late valuation model that only works once Bitcoin has accumulated to a certain amount. Early-stage companies have completely different strategies and premium logics from MicroStrategy." Thanks to equity structures like super voting rights, the US stock DAT company can ensure team control even as equity is continuously diluted.

However, Asian listed companies generally do not have such mechanisms, so the team's dilution space is relatively limited. This means that the team needs to accurately grasp the financing pace while repurchasing shares through main business cash flows to reverse dilution. It is understood that Thailand's DV8 has obtained relevant local licenses and will soon launch a cryptocurrency trading platform.

Currently, Sora is accelerating the finalization of an acquisition deal in the Taiwan market while also advancing on the establishment of its second Bitcoin reserve company in Japan. In May of this year, the team acquired a 90% stake in the US-listed Hong Kong luxury goods distributor, Top Win, which will soon be rebranded as Asia Strategy. "Our goal is to create 9 to 10 'Metaplanets' in Asia and then consolidate them into a US-listed parent company, allowing stock market investors to indirectly access the premium of Asian companies through us."

Top Win has been involved in the acquisition of several companies, including Metaplanet, Evermoon Holdings, DV8, and SGA. The company is also on the verge of completing its seed round financing. Sora Ventures continues to follow a "multi-player + small capital" model, with a total fundraising amount of less than $10 million and a 6-month lock-up period.

Luke hopes that in the future, Top Win will have a capital allocation of 30% in controlling Asian companies and 60% in Bitcoin reserves to present a different narrative to investors. Of course, all of this is just the team's vision and story. Whether the premium in the Asian market is sustainable and whether US stock market investors will buy into the Asian narrative remain to be validated by the market and time.

"It must be acknowledged that the Asian market has a low floor and a low ceiling. If you really want to achieve a certain scale, it has to be in the US stock market, which attracts investors and players from all over the world." Despite investors' attempts to chase the Alpha of the Bitcoin reserve narrative in various countries, all investors share a consensus that the Beta that underpins everything still comes from the favorable regulations in the US driving force.

"If legislation on national Bitcoin reserves and the like really takes effect, the US government's buying behavior will drive other regional governments and sovereign funds to synchronize their allocations, and Bitcoin may continue to rise," Nachi said.

The Rescued by "Crypto-Stock" Individuals

Compared to the bleak cryptocurrency market, the current DAT track appears particularly lively, capturing attention and seemingly providing a "way out" for capital trapped in the crypto circle. "Nowadays, the top hundred cryptocurrency projects by market cap are all considering doing DAT," as an investor told Dǒngchá Beating.

By the end of 2024 and the beginning of 2025, many crypto VC funds will be reaching the end of their terms, a critical point for starting a new round of fundraising. However, the dismal DPI data has made many LPs hesitant. Since the beginning of the year, many crypto funds have been closing down.

Since 2022, valuations in the cryptocurrency primary market have been continuously inflating, with many projects raising tens of millions of dollars in the seed round, but few have actual innovation and implementation scenarios. With the development of cryptocurrency ETFs and the FinTech+Crypto field, VCs have become the last choice for LPs to allocate crypto assets.

On the other hand, the continuously shrinking market liquidity is also increasing the difficulty of projects' exits. Retail investors are no longer buying into "VC coins," and at the same time, projects need to pay a high listing cost to get listed. "Nowadays, to list on a top-tier exchange, you generally need to allocate at least 5% of the token supply. Based on a $100 million market cap, the cost would be $5 million. To get a shell company listed on the US stock market costs about the same."

However, the open regulatory environment in the United States has brought new hope. Cryptocurrency reserve companies have not only found the best exit route for tokens but have also provided a new narrative to attract institutional funds to the crypto space.

In addition to crypto VC funds, mid-tier investment banks have also benefited from this trend. According to Bloomberg, DAT trading has taken up 80% of many mid-tier investment bank brokers' working time, and the business in this area is expected to grow by 300% by the end of the year.

Now, the industry is eager to move the $2 trillion cryptocurrency market into the US stock market. In less than two months, dozens of DAT companies have emerged in the market.

According to Pantera's vision, significant consolidation in the DAT field will occur within three to five years. When the downturn comes, small DAT companies that cannot achieve economies of scale will fall into a discount dilemma and be acquired by larger competitors at very low prices. "DAT is a 'new financial-capital model experiment,' not the center of technological innovation. In the end, only two to three companies will survive."

However, it seems like the music has just started playing. Cosmo believes that it will take at least another six months before the competition heats up, "Ultimately, who will prevail is a complete unknown, and all we can do is support the teams that we believe could be one of those 'two to three' in the future."

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