CGV Research: MicroStrategy’s Success Drives Corporate Balance Sheets Toward The Programmable Era

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by Alisa Davidson

Published: July 11, 2025 at 7:59 am Updated: July 11, 2025 at 7:59 am

by Ana

Edited and fact-checked: July 11, 2025 at 7:59 am

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Research and investment division of the cryptocurrency investment firm Cryptogram Venture (CGV), CGV Research, has published a new report examining the global distribution of corporate cryptocurrency reserves. The report also analyzes the capital operation model centered on MicroStrategy and investigates the distinct strategies and potential risks faced by companies holding altcoin reserves. According to CGV Research, this ongoing “digital asset transformation” led by traditional corporations is influencing the future framework of corporate financial management.

The report highlights several key aspects of the global corporate cryptocurrency reserve landscape. In terms of geographical distribution among listed companies, those listed in the United States account for the largest share at 65.2%, followed by Canada at 16.9%, Hong Kong at 7.9%, Japan at 3.4%, and other markets comprising 6.7%. Regarding cryptocurrency composition, Bitcoin (BTC) makes up 78% of reserves, while Ethereum (ETH), Solana (SOL), and Ripple (XRP) each represent roughly 5-6%. Other cryptocurrencies account for the remaining 5%. When considering the total value of reserves, Bitcoin dominates with 99%, with all other assets combined making up just 1%.

Analysis of the timing of companies’ initial announcements about strategic cryptocurrency reserves reveals clear patterns that correspond with cryptocurrency market cycles. Two notable peaks occurred: in 2021, when 25 companies disclosed their reserves amid rising Bitcoin prices and the influence of MicroStrategy’s example; and in 2025, with 28 companies announcing reserves, marking a record high and reflecting growing corporate acceptance of cryptocurrencies as reserve assets. In contrast, a trough occurred during 2022-2023, when only three companies made announcements, likely due to the cryptocurrency bear market and regulatory uncertainty. The trend of companies announcing cryptocurrency reserves continues, with the total number of listed companies holding cryptocurrency reserves expected to surpass 200 this year, indicating ongoing expansion of cryptocurrency adoption within established industries.

Strategic Reserves, Capital Management, And Stock Performance

CGV Research identifies three primary capital operation models used by companies holding digital asset reserves. The first is the leveraged accumulation model, where companies with relatively weak core businesses raise capital through debt or equity financing to acquire cryptocurrency assets. As cryptocurrency prices increase, the company’s net assets and stock prices rise, enabling additional financing and creating a reinforcing cycle. In this model, the company’s stock essentially acts as leveraged exposure to the underlying cryptocurrencies. When managed effectively, this approach can amplify growth in both stock price and net asset value with limited initial capital. Examples include MicroStrategy, SharpLink Gaming, DeFi Development Corp, Nano Labs, and Eyenovia.

The second model is the cash management model, employed by companies with strong core businesses unrelated to cryptocurrencies. These companies invest excess cash in high-quality cryptocurrency assets primarily for investment returns. This strategy generally has little to no positive effect on the stock price and can sometimes lead to declines due to investor concerns about diverting attention from the core business. Companies using this approach include Tesla, Boyaa Interactive, and Meitu.

The third model, the operational reserve model, involves companies holding cryptocurrency reserves directly or indirectly as part of their core crypto-related business activities. This can include cryptocurrency exchanges or mining companies that retain mined coins as reserves to mitigate business risks. Examples of this model are Coinbase and Marathon Digital.

Among the companies examined, MicroStrategy is particularly notable. It effectively utilized debt financing to transition from a software provider with a history of losses into a major Bitcoin holder with a market capitalization in the tens of billions. The company’s operational approach presents a valuable case for thorough analysis.

MicroStrategy: A Case Study In Leveraged Cryptocurrency Reserve Operations

Since MicroStrategy revealed its Bitcoin treasury strategy in 2020, its stock price ($MSTR) has shown a strong correlation with Bitcoin’s price ($BTC), but with considerably greater volatility, as illustrated in the accompanying chart. Between August 2020 and the present, MSTR’s value has increased nearly thirtyfold, while Bitcoin’s price has risen approximately tenfold during the same timeframe.

Monthly analysis of volatility and correlation between Bitcoin and MSTR indicates that MSTR’s price correlation with Bitcoin typically falls between 0.6 and 0.8, signifying a strong connection. However, MSTR’s volatility consistently exceeds Bitcoin’s by multiple factors. This dynamic essentially positions MSTR as a leveraged equity proxy for Bitcoin. Market pricing further supports this leverage characteristic: In June 2025, the implied volatility of MSTR’s one-month call options was 110%, which is 40 percentage points higher than Bitcoin’s spot volatility, reflecting a leverage premium assigned by the market.

The foundation of MicroStrategy’s model lies in securing low-cost funding to acquire Bitcoin. The model remains sustainable as long as Bitcoin’s expected returns surpass the actual financing costs. By using a diverse array of capital instruments, MicroStrategy has converted Bitcoin’s inherent volatility into a structural financing benefit. The company employs various financing methods that together create a self-reinforcing capital cycle. Analysts at VanEck have described this approach as an innovative integration of digital currency economics with traditional corporate finance principles.

MicroStrategy’s capital operations focus on two main goals: managing the debt-to-equity ratio and increasing Bitcoin holdings per share. Assuming Bitcoin appreciates over the long term, these objectives contribute to enhancing the stock’s value. Compared to collateralized loans—which often involve inefficiencies such as requiring over 150% collateral, risks of liquidation, and borrowing limits—financing tools with embedded options like convertible bonds and preferred stock provide lower costs and less strain on the balance sheet. Additionally, At-The-Market (ATM) common stock sales offer rapid and flexible access to capital. Preferred stock is accounted for as equity rather than debt, which further reduces the company’s debt ratio compared to using convertible bonds.

CGV Research observes that MicroStrategy’s sophisticated array of capital instruments is well-regarded among professional investors, who use these tools to capitalize on discrepancies between realized volatility, implied volatility, and other option pricing factors. This dynamic supports strong demand for MicroStrategy’s financing mechanisms. An examination of quarterly Bitcoin holdings, debt levels, and key capital activities reveals that the company strategically employs different financing approaches depending on market conditions. During periods of high Bitcoin volatility and elevated stock premiums, MicroStrategy issues convertible bonds and preferred stock to expand its Bitcoin reserves. Conversely, in times of low Bitcoin volatility and negative stock premiums, it relies on At-The-Market (ATM) common stock sales to avoid excessive debt and reduce the risk of forced liquidations.

Convertible bonds and preferred stock are favored during periods of high premium for several reasons. The dilution impact on shareholders is delayed compared to direct ATM stock issuance, which causes immediate dilution. Additionally, preferred stock dividends offer tax advantages, with a portion of the dividend payments being tax-deductible, lowering effective financing costs below typical corporate bond rates. In contrast, common stock issuance does not provide such tax benefits. Large ATM stock sales can also signal management’s perception of overvaluation, which might trigger algorithmic selling, so the company tends to avoid heavy ATM activity during sensitive periods.

MicroStrategy’s unique capital structure results in amplified stock price movements relative to Bitcoin’s price changes, with significant portions of debt converting into equity during price increases. Since the company began its Bitcoin purchases, total shares outstanding have grown from 100 million to 256 million, representing a 156% increase. Despite this considerable dilution, shareholder equity has increased substantially as the stock price rose nearly thirtyfold. To better capture shareholder value, MicroStrategy introduced the metric Bitcoin per Share (BTC/Share), which has shown a consistent upward trend, increasing roughly tenfold from an initial 0.0002 BTC per share. When the stock trades at a premium to its net asset value, financing through equity dilution can effectively raise the BTC/Share ratio because each dollar raised can acquire more Bitcoin than the current BTC holdings per share, increasing post-dilution value despite share expansion.

The MicroStrategy model’s success depends on three main elements: exploiting regulatory advantages, correctly anticipating Bitcoin price appreciation, and maintaining advanced capital management capabilities. However, inherent risks exist within these factors. Changes in legal and regulatory frameworks pose a threat. When the strategy was first launched, Bitcoin spot ETFs were not available, leading many institutions to use MicroStrategy as a regulated proxy for Bitcoin exposure. Since then, the regulatory landscape has evolved, with new compliant cryptocurrency investment vehicles reducing the arbitrage advantage. Additionally, regulatory bodies such as the SEC may scrutinize MicroStrategy’s business model, as its debt is used exclusively for investment rather than business growth. This could lead to reclassification as an investment company, subjecting it to stricter capital requirements and reducing leverage capacity. Proposed legislation taxing unrealized gains on corporate holdings would further increase the company’s tax burden.

MicroStrategy’s performance is also closely tied to Bitcoin market dynamics. The company holds about 2.84% of the total Bitcoin supply, which means its stock price volatility often exceeds Bitcoin’s own volatility, amplifying downward pressure during bear markets. Furthermore, the stock has consistently traded at a substantial premium—often over 70%—to its Bitcoin net asset value, a level influenced by optimistic market expectations that may not always be rational.

There are structural risks related to the company’s reliance on debt leverage. The financing cycle—issuing new debt to purchase Bitcoin, which raises the stock price and allows for more debt issuance—resembles a double-layered Ponzi scheme. If Bitcoin prices fail to rise sufficiently by the time large convertible bonds mature, refinancing new debt may become difficult, leading to liquidity issues. Additionally, if Bitcoin falls below conversion strike prices, the company might be forced to repay debt in cash, creating financial strain. Without stable operating cash flows and a reluctance to sell Bitcoin holdings, MicroStrategy depends heavily on equity issuance to service debt. A significant drop in either stock or Bitcoin prices could sharply increase financing costs, close funding channels, or cause severe dilution, endangering ongoing Bitcoin accumulation and financial stability.

Over the long term, a downturn in risk assets could cause multiple risks to converge, potentially triggering a downward spiral. Another possible outcome is regulatory intervention that transforms MicroStrategy into a Bitcoin ETF or a similar investment vehicle. Given its 2.88% Bitcoin holdings, a forced liquidation could pose systemic risks, while conversion into an ETF structure might offer a safer alternative. Although large, these holdings would not be unusual for an ETF. Recent regulatory developments, such as the SEC’s approval in July 2025 of Grayscale’s Digital Large Cap Fund conversion into a multi-asset ETF including BTC, ETH, XRP, SOL, and ADA, demonstrate the potential feasibility of such a transition.

Valuation Regression Analysis: Transition From Sentiment-Driven To Fundamentals-Based Pricing

The volatility trajectory of $SBET experienced significant fluctuations tied to key events. In May 2025, $SBET announced a $425 million PIPE financing aimed at acquiring 176,271 ETH, valued at approximately $463 million at the time, making it the largest corporate holder of Ethereum. This announcement led to a dramatic 400% intraday surge in the stock price. However, subsequent SEC disclosures revealed that PIPE investors were permitted to immediately resell their shares, which triggered widespread panic selling driven by concerns over shareholder dilution. As a result, the stock price fell sharply by 70%. Ethereum co-founder and $SBET Chairman Joseph Lubin clarified that no shareholder sales were planned, but the initial negative sentiment had already impacted investor confidence.

By July 2025, signs of valuation stabilization emerged, with the stock price settling around $10 and a market net asset value (mNAV) of approximately 1.2, though the post-dilution implied mNAV was closer to 2.67. This stabilization was supported by several factors, including an appreciation in Ethereum holdings after the company added $30.6 million to acquire 12,207 additional ETH, bringing total holdings to 188,478 ETH valued at about $470 million—roughly 80% of the company’s market capitalization. Furthermore, staking rewards were realized, with the company earning 120 ETH through liquid staking derivatives (LSDs). Liquidity also improved, with average daily trading volume reaching 12.6 million shares and short interest declining to 8.53%.

In contrast, $DFDV displays a different volatility profile with stronger downside support despite high fluctuations. Although it experienced a single-day drop of 36%, the stock remains approximately 30 times higher than its value before a significant transformation. This resilience is attributed partly to its relatively low market capitalization prior to transformation and notably to its diversified business model, which includes infrastructure investments that provide additional valuation backing.

$DFDV’s valuation is also supported by its holdings of 621,313 SOL tokens, valued at roughly $107 million, which generate multiple income streams. These include price appreciation of SOL, which constitutes about 90% of the holding’s value, staking rewards offering 5% to 7% annual percentage yield (APY), and validator commissions charged to ecosystem projects such as $BONK.

Regarding the difference between Proof of Work (PoW) and Proof of Stake (PoS) systems, staking native PoS tokens like ETH and SOL provides annual yields. Although these yields may not directly factor into traditional valuation models, liquid staking adds operational flexibility. Bitcoin, a PoW cryptocurrency, lacks a yield mechanism but features a fixed supply with decreasing inflation, currently around 1.8%, which emphasizes scarcity. PoS tokens produce yields through staking, and when staking APY surpasses token inflation, the staked assets gain nominal value. Currently, SOL staking yields range from 7% to 13%, outpacing inflation at approximately 5%, while ETH staking yields 3% to 5% compared to inflation under 1%. While staking rewards provide additional returns, the balance between inflation and rewards requires ongoing observation. It is important to note that staking rewards are denominated in tokens and do not directly translate to secondary market buying pressure to increase token prices.

Liquid staking enables the use of staked tokens—such as stETH or stSOL—in decentralized finance (DeFi) applications, including as collateral for loans, which significantly enhances capital efficiency. For example, $DFDV has issued DFDVSOL tokens, leveraging this mechanism to improve capital flexibility.

Validation Of MicroStrategy’s Success Factors For Altcoin Reserve Companies

The pace of ETF approvals has increased notably, with numerous institutions submitting applications for a range of cryptocurrency ETFs, making regulatory approval seem imminent. Although stocks and bonds of altcoin reserve companies continue to attract investor interest ahead of the introduction of more sophisticated, token-specific financial products, the opportunity for regulatory arbitrage in this space is gradually diminishing.

Bitcoin, often regarded as “digital gold,” has achieved broad global consensus as a reserve asset, while Ethereum (ETH) and Solana (SOL) have not reached a similar status and are mainly perceived as utility tokens. Throughout 2024 and 2025, altcoins underperformed Bitcoin considerably. Bitcoin’s market dominance steadily increased during 2024, approaching roughly 65%. Traditionally, periods known as “altcoin seasons” have followed Bitcoin’s price peaks, but this cycle saw altcoins lagging behind. When Bitcoin reached new all-time highs, both ETH and SOL remained below half of their own previous peaks.

Altcoin reserve companies, compared to those focusing on Bitcoin, have greater flexibility to participate actively in blockchain ecosystems to generate cash flow and leverage decentralized finance (DeFi) for improved capital efficiency. For instance, $SBET, chaired by the founder of Consensys, has potential in wallets, blockchain infrastructure, and staking services. $DFDV has partnered with Solana’s largest meme coin, $BONK, to operate validator networks that contribute significantly to its revenue. Additionally, $DFDV has created tradable DeFi tokens backed by staking rewards. $HYPD, formerly known as Eyenovia ($EYEN), focuses on staking and lending $HYPE tokens while expanding node operations and affiliate programs. $BTCS acts as an Ethereum node and staking provider, utilizing liquid staking tokens and Bitcoin as collateral on Aave to secure low-cost financing.

Given the shrinking window for regulatory arbitrage and the uncertain prospects for token appreciation, altcoin reserve companies are increasingly required to innovate by embedding themselves deeply within on-chain ecosystems and generating cash flow through ecosystem-related activities to strengthen their financial resilience. While MicroStrategy has applied complex capital strategies to convert Bitcoin’s volatility into leveraged equity exposure, altcoin reserve firms are seeking to resolve valuation challenges through DeFi-enabled operations. However, factors such as the diminishing regulatory arbitrage opportunities, the varying consensus levels behind different tokens, and inflation concerns linked to Proof of Stake protocols contribute to ongoing uncertainty in this sector. As more traditional corporations enter the space, strategic cryptocurrency reserves are expected to shift from speculative bets to more measured allocations. Their ultimate importance may lie less in short-term arbitrage gains and more in advancing corporate balance sheets toward programmable finance.

As Michael Saylor expressed, this effort is not simply about acquiring Bitcoin but about constructing a treasury system suited for the digital era. The true test of this approach will be the balance sheet’s ability to withstand downturns in Bitcoin’s price, where it must manage the combined pressures of falling asset values and increased stock volatility. This challenge represents a crucial consideration for traditional businesses contemplating participation in this emerging trend.

About The Author

Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.

More articles

Alisa Davidson

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Alisa Davidson

Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.

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More articles