Blockchain concept stocks welcome new opportunities

As the global financial regulatory environment becomes increasingly clear, the cryptocurrency market is gradually moving towards the mainstream financial system. After the U.S. elections, Trump's election as president had a positive impact on the cryptocurrency industry, promising to adopt more friendly regulatory policies, including the establishment of a national Bitcoin reserve and encouraging the expansion of Bitcoin mining activities in the U.S., which boosted market confidence. Against this backdrop, multiple Blockchain concept stocks generally rose.

More and more listed companies are realizing the enormous potential of Blockchain technology and actively incorporating it into their corporate strategic layout. Many Blockchain concept stock companies are developing rapidly, gaining significant attention and investment in the market. These companies are promoting business digital transformation and value creation by introducing Blockchain technology, gradually becoming important players in the industry.

In recent years, especially with the regulatory dividends brought by the launch of cryptocurrency-related ETFs in the United States, it marks that cryptocurrencies are no longer confined to a closed digital currency market but are deeply integrated with traditional capital markets. Data shows that the assets under management of BlackRock's Bitcoin spot ETF have reached $17.243 billion, and it has almost always been in a state of net inflow since the beginning of the year. Meanwhile, the assets under management of Grayscale's Bitcoin spot ETF amount to $13.659 billion, demonstrating investors' 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): As the core asset of the entire crypto market, Bitcoin currently has a market capitalization of approximately $1.9 trillion, accounting for over 50% of the total cryptocurrency market value. It is not only recognized as a store of value by both traditional finance and the native crypto community but also, due to its anti-inflation characteristics and limited supply, has become the preferred choice for institutional investors, earning it the title of "digital gold." Bitcoin plays a crucial role in the crypto market, stabilizing the market while also 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, and functional tokens in on-chain applications, etc. This field is diverse and highly volatile, with its market performance driven by technological updates and user demand. Currently, the market capitalization is approximately $1.4 trillion, which is actually much lower than the market's expectations for high growth.

3. The integration of traditional assets and encryption technology: This field encompasses emerging projects such as the tokenization of on-chain real world assets (RWA) and blockchain-based securitized assets. Currently, its market value is only a few hundred billion dollars, but with the popularization of blockchain technology and the deep integration of traditional finance, this area is rapidly developing. By tokenizing traditional assets to enhance liquidity, it is also one of the main driving forces for future growth in the cryptocurrency market.

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 also transitioned from old powers to new funding sources.

In 2024, the position of cryptocurrency in the traditional financial sector was further consolidated. Financial giants, including BlackRock and Grayscale, have launched exchange-traded products for Bitcoin and Ethereum, providing institutional and retail investors with more convenient channels for digital asset investment, which further confirms 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 in 2024 using Blockchain technology. These bonds are settled through Distributed Ledger Technology (DLT). French computer equipment manufacturer Metavisio issued corporate bonds, utilizing 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 cryptocurrency technology into their business models.

Nowadays, a capital circulation model centered around Bitcoin as the core asset, using ETFs and the stock market as the main channels for capital inflow, and leveraging publicly listed companies as the carrying platform, is continuously absorbing dollar liquidity and is fully unfolding.

The combination of traditional finance and Blockchain will generate more investment opportunities than native on-chain assets. Behind this trend lies 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.

From these perspectives, it can be seen that the future development of the cryptocurrency market is not merely an incremental increase in digital currencies themselves, but the enormous potential of integration with traditional finance. From regulatory dividends to changes in market structure, Blockchain concept stocks are at a critical juncture in this major trend, becoming the focus of global investors.

Blockchain Concept Stock Classification

1. Asset-Driven Concept:

Regarding the concept of asset allocation in Blockchain stocks, the company's strategy is to use Bitcoin as the main reserve asset. This strategy was first implemented by MicroStrategy in 2020 and quickly attracted market attention. This year, other companies have also joined in, and the acquisition of Bitcoin has been steadily increasing.

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 outstanding shares and calculates the number of Bitcoins held per share, disregarding Bitcoin price fluctuations, aiming to help investors better understand the company's behavior of purchasing Bitcoins 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 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. Reports indicate that MicroStrategy's current total outstanding debt is $4.25 billion. During this period, the company has financed through multiple rounds of issuing convertible bonds, some of which also come with interest payments. Market analysts are concerned that if the price of Bitcoin were to drop significantly, MicroStrategy might need to sell some of its Bitcoins to repay its debts. 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 plummet, it is unlikely to force the company to sell its Bitcoin assets. Additionally, MicroStrategy's stock market value currently stands at $43 billion, and the proportion of debt in its capital structure is relatively small, which further reduces the risk of liquidation.

Despite many investors being optimistic about the company's firm Bitcoin investment strategy, believing it will bring substantial returns to shareholders, there are also concerns among some investors regarding its high leverage and potential market risks. Due to the extreme volatility of the cryptocurrency market, any adverse market changes could significantly impact the asset value of such companies, and their stock price exhibits a notable premium relative to their net asset value, raising questions about the sustainability of this status. If the stock price experiences a pullback, it could affect the company's financing ability, thereby influencing its future Bitcoin purchasing plans.

1、Microstrategy(MSTR)

MicroStrategy was founded in 1989, initially focusing on business intelligence and enterprise solutions. However, starting in 2020, the company transformed into the world's first publicly traded company to adopt 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 shift, evolving from an early Bitcoin skeptic to a staunch supporter of cryptocurrency.

Since 2020, MicroStrategy has continuously purchased Bitcoin through its own funds, bond financing, and other means. As of now, the company has accumulated approximately 279,420 Bitcoins, with a current market value close to $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 acquisition 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 its Bitcoins and instead chose to continue accumulating. Since 2023, the strong rise of Bitcoin has significantly boosted MicroStrategy's stock price, with a year-to-date return on investment reaching 26.4% and a cumulative return on investment exceeding 100%. MicroStrategy's current operating model can be regarded as a "BTC-based circular leverage model," raising funds through bond issuance to purchase Bitcoin. Although this model brings high returns, it also carries certain risks, especially during periods of severe Bitcoin price fluctuations. According to analysis, the company could face liquidation risk only if the Bitcoin price falls below $15,000, while the current Bitcoin price is close to $90,000, making this risk very low. Additionally, the company's leverage ratio is low, and there is strong demand in the bond market, further enhancing MicroStrategy's financial stability.

For investors, MicroStrategy can be seen as a leveraged investment tool in the Bitcoin market. With expectations of a steady rise in Bitcoin prices, the company's stock has significant potential. However, caution is needed regarding the medium to long-term risks that may arise from debt expansion. In the next 1 to 2 years, MicroStrategy's investment value will still be worth paying attention to, especially for investors who are optimistic about the prospects of the Bitcoin market, as it is 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 recently acquired 47 Bitcoins, bringing its total holdings to 1,058 Bitcoins, with a total investment amount reaching approximately $71 million. Part of the funds for these acquisitions comes from operating cash flow, indicating that Semler is attempting to strengthen its asset structure through Bitcoin holdings, positioning itself as a representative of innovation in asset management.

However, Semler's core business still focuses on its QuantaFlo device, which is primarily 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. Despite a 17% year-on-year decline in revenue for that quarter, it still provided Semler with a financial hedge against economic fluctuations.

Despite Semler's current market capitalization of only $345 million, which is far lower than MicroStrategy, its strategy of adopting Bitcoin as a reserve asset has led investors to regard it as the "mini-MicroStrategy."

3. Boya Interactive

Boyaa Interactive is a company primarily engaged in games, ranking among the top developers and operators in China's board game industry. In the second half of last year, it began exploring the cryptocurrency market, aiming to fully transform into a Web3 company. The company has acquired large amounts of cryptocurrencies such as Bitcoin and Ethereum, invested in multiple Web3 ecosystem projects, and formed strategic partnerships in Web3 game development and the Bitcoin ecosystem. The company has stated: "Purchasing and holding cryptocurrencies is an important measure for our group to develop and layout Web3 business, and it is also a crucial part of our asset allocation strategy." As of the latest announcement, Boyaa Interactive holds 2,641 Bitcoins and 15,445 Ethers, with total costs of approximately $143 million and $42.578 million, respectively.

It is worth mentioning that due to the recent activity in the cryptocurrency market, Bitcoin and other cryptocurrencies have experienced significant increases. Based on the closing prices of cryptocurrencies on the 12th, in Bitcoin, Boya Interactive has an unrealized gain of nearly $90.22 million; in Ethereum, Boya Interactive has an unrealized gain of about $7.95 million, totaling an unrealized gain of nearly 1