Source: Why Twenty One Capital Is More About Volatility Than Bitcoin; Translated by Daisy, ChainCatcher
Editor's Note:
This article is compiled from an in-depth conversation on the crypto podcast Unchained, hosted by host Laura Shin and two guests, Jeff Park (former Jump Trading investor and current 21Shares investment director) and Mark Palmer (Bitwise analyst). The topic focuses on 21 Capital, a new Bitcoin holding company co-founded by Tether, SoftBank, Bitfinex and Cantor. Its goal is to increase Bitcoin holdings per share (BPS) and Bitcoin rate of return (BRR), and is seen as a new attempt at Bitcoin's "corporatization" route after MicroStrategy.
The conversation revolves around four core issues: the behavioral logic of strategic investors, Tether and the reconstruction of the global capital structure, the arbitrage path between Japanese funds and US bonds, and whether Solana has the possibility of replicating the Bitcoin financialization model. The content covers multiple levels such as macro-financial trends, capital structure design, differences in investment preferences and narrative ability.
The following content is a compilation and compilation of the interview.
TL;DR:
Strategic investors focus on volatility rather than profitability, and 21 Capital's stock pricing logic is based on volatility realization.
The establishment of 21 Capital marks a new stage in the corporatization of Bitcoin, and is jointly initiated by a number of international institutions.
Tether is a beneficiary of dollar arbitrage, and SoftBank represents Japan's long-term suppressed capital. The two achieve global arbitrage through Bitcoin.
The shift in the US regulatory environment is driving institutional entry, and stablecoin and digital asset legislation are seen as key windows.
Investors' choices are not only based on product structure, but also reflect values and narrative preferences (Saylor vs Mallers).
Solana's financialization path has structural differences, and its inflation mechanism, pledge model, and asset credit are not comparable to Bitcoin.
Strategic companies do not look at profits, but rely on volatility to price
Laura Shin: Tether, Bitfinex, SoftBank and Cantor Equity Partners co-founded the Bitcoin holding company 21 Capital, which operates similarly to MicroStrategy. The company initially held 42,000 Bitcoins with a market value of approximately US$4 billion. It has become the world's third largest corporate Bitcoin holder, with the goal of increasing Bitcoin holdings per share (BPS) and Bitcoin rate of return (BRR). What was your first reaction to the news? Jeff, please share first.
Jeff Park: My first reaction was shock. 21 Capital has a very special institutional background, symbolizing the convergence of multiple global forces such as politics, economy, capital and social capital on Bitcoin. Led by Jack Mallers, this is a major cross-generational and cross-field collaboration, marking the global reconstruction of the financial order around Bitcoin and a critical moment in the history of crypto development. At present, many strategic investors do not focus on profits, and financial reports have limited impact on stock prices. Investors who bought CEP shares at a three-fold premium care more about the returns brought by volatility than the traditional profit model.
Laura Shin: Mark, what do you think?
Mark Palmer: This is a recognition of Michael Saylor's strategy. He was the first to raise funds through the capital market to buy Bitcoin in 2020. Although it was questioned, it has now become an industry paradigm. New players such as 21 Capital can learn from MicroStrategy's experience, avoid its financing mistakes, and continue effective practices to promote further evolution of strategies.
Tether, SoftBank and Bitcoin: A Global Arbitrage Game
Laura Shin: Tether may be the company with the highest per capita profit in the world, with profits of $13 billion in 2024. Against the backdrop of possible downward interest rates, it may have reached its peak of profitability. Now that it has become the largest shareholder of 21 Capital, does this mean that its strategic direction is changing?
Mark Palmer: It is reasonable for Tether to promote revenue diversification. Although the new business is not directly related to stablecoins, this transformation is forward-looking considering the possible stablecoin regulation in the United States. Tether has indicated that it may set up a new business unit for the US market. Between regulatory pressure and global expansion, it is wise to find a more friendly operating environment.
Jeff Park: Tether is a new beneficiary of the US dollar hegemony. It earns interest by holding US bonds, but does not need to pay interest to fund holders. It can be regarded as a monetary loophole. Its combination with Bitcoin reflects the demand of global capital for safe assets outside the US system, and the structure of 21 Capital reflects this. Tether is also promoting projects such as Plasma, trying to expand the function of stablecoins based on Bitcoin. This is an important step in its diversification. The ultimate goal is to achieve real financial utility through the Bitcoin standard and inject profits back into the Bitcoin ecosystem, which has far-reaching significance for the entire community.
Laura Shin: Jeff, you mentioned in your investor memo that Tether is the Eurodollar of the 21st century. Can you briefly explain the historical and geopolitical background behind this judgment in conjunction with SoftBank's participation?
Jeff Park: The cooperation between Tether and SoftBank constitutes an ideal capital structure. SoftBank represents the long-suppressed Japanese capital, which is accustomed to seeking growth through high-risk investments, such as AI, ARM, and WeWork. Masayoshi Son called it the "300-year plan". Tether is the biggest beneficiary of global financial repression, making profits through arbitrage of US debt. The combination of the two represents the cooperation between capital importing countries and capital harvesters, and Bitcoin is their common bridge. In the future, similar "public-private partnership" structures will increase, which integrate sovereign capital and avoid political risks. The triangular structure formed by Tether, SoftBank and Cantor is an efficient and flexible capital coordination model.
Laura Shin: What you mean is that Japanese capital seeks overseas growth, and Tether can export US dollars to these demanders. The key is that it is not regulated by the United States, right?
Jeff Park: That's right. Tether and Japan are both major buyers of US debt, but they make profits in different ways: Tether earns interest directly, while Japan allocates global assets based on interest rate spreads. Bitcoin has become a common countermeasure for both parties under the expectation of falling interest rates. Tether needs to find new sources of profit, and SoftBank needs to release long-suppressed capital. Bitcoin just meets the needs of both parties. MicroStrategy has opened up the leveraged financing channel for Bitcoin, and introducing low-interest funds from Japan to invest in Bitcoin will be a global arbitrage, which is a path that Saylor has not yet realized.
Laura Shin: Mark, what do you think of Jeff's analysis?
Mark Palmer: I completely agree. The core of global finance is to match capital seeking returns with assets with return capabilities. Whether Tether can connect with Japanese capital depends on whether institutions are willing to enter the market. The crypto market used to be dominated by retail investors, and institutions waited and watched due to unclear supervision. If the United States passes stablecoin and digital asset legislation, institutional funds will flow in. Now is the critical time for global capital to deploy crypto.
Saylor vs Mallers: Are you investing in Bitcoin or faith?
Laura Shin: Some people think that SoftBank's return to the crypto market may be a top signal, especially considering that Masayoshi Son lost $130 million on Bitcoin investment in 2017. What do you think?
Jeff Park: Many people who enter the crypto market for the first time will experience losses, but this often makes them more determined in the future. Masayoshi Son is a typical macro trader, and Vision Fund itself is a macro platform. His early failure does not mean that he will not succeed now. Today, the world's top macro investors such as Druckenmiller and Dalio have dabbled in Bitcoin, and the market environment is completely different from 2017. SoftBank is good at leverage operations, and if its capabilities are combined with Bitcoin, the potential is huge.
Mark Palmer: Yes, the market was not mature in 2017-2018, and many people lost money. Today, institutional participation is more rational, and although Bitcoin is still speculative, its fundamentals have improved greatly.
Laura Shin: Finally, let's talk about Cantor. What do you think of its strategic role in listing and financial operations?
Mark Palmer: Cantor's participation reflects Wall Street's changing attitude towards cryptocurrencies. In the past, banks were on the sidelines due to unclear regulations, but now that policies have turned friendly, banks can participate more confidently while protecting customer interests. Changes in the regulatory environment have created opportunities for them.
Jeff Park: I totally agree. Cantor is a bridge between the United States and global capital. In the context of Tether and SoftBank being free from US regulation, Cantor has achieved the binding of US interests. This is one of the reasons why Tether chose to cooperate with Japan's SoftBank. As important allies, the United States and Japan have closely combined the financialization of Bitcoin with geostrategy through the triangular structure formed by Tether, SoftBank and Cantor.
Laura Shin: We talked about geopolitics, regulatory changes and market stages. What do you think of 21 Capital's timing of entry? How is it different from when MicroStrategy was launched?
Jeff Park: MicroStrategy entered Bitcoin in 2020 at a time when concerns about the pandemic and inflation were intensifying. The entry of institutions such as PayPal and the rise of DeFi made it an ideal time. The sharp rise of Bitcoin in 2021 has verified this decision. Now that the US regulatory environment is about to change, institutional funds are expected to enter the market, which is a very favorable time for 21 Capital to enter the market.
Mark Palmer: The pandemic and loose policies in 2020 caused people to be uneasy about fiat currency, so Saylor turned to Bitcoin. Today's Japan is experiencing a similar awakening. Despite long-term cooperation with the global order and maintaining the depreciation of the yen, it has been accused by the United States of manipulating the exchange rate, causing domestic resentment and policy reflection. Bitcoin has once again become a hedging tool, and this transformation is exactly the same as that year.
Laura Shin: Although it does not constitute an investment advice, what do you think of the Bitcoin spot ETF, MicroStrategy and 21 Capital products that are suitable for which investors?
Jeff Park: The key is whether to accept leverage risk. MicroStrategy and 21 Capital provide leveraged exposure to Bitcoin, with higher returns when prices rise and greater volatility when prices fall; ETFs are closer to spot prices and have lower volatility. Firmly bullish Bitcoin investors may consider leveraged tools to obtain higher returns.
Mark Palmer: Investment choices depend not only on the product itself, but also on values. Some people agree with the American ideas represented by Saylor, while others prefer the technical orientation and young vision embodied by Jack Mallers. 21 Capital has international capital behind it and may not be considered a "pure American company." When the difference in returns narrows, cultural identity and concept matching often determine the final choice.
Can Solana be financialized? Bitcoin's route is difficult to replicate
Laura Shin: Among the many Bitcoin-like companies, which strategies or companies do you think are more likely to win?
Mark Palmer: The winners will be those that create the greatest volatility with the least capital. In an era of highly structured finance, the market prefers volatility. MicroStrategy has a more complex capital structure, while 21 Capital focuses on a simple structure. If it can bring higher volatility, the market may prefer it.
Jeff Park: I agree. Volatility is key, but the path can be different. MicroStrategy expands financing channels to adapt to different investment preferences, such as convertible bond arbitrage funds. In contrast, 21 Capital chooses a simpler structure. In the end, it depends on who investors are willing to follow - Saylor or Mallers. Jack Mallers has both technical and financial capabilities, and also has the influence of an "evangelist".
Mark Palmer: In today's market, the ability to tell stories is crucial. Saylor is good at using language and metaphors to win resonance, which is also an important factor in the company's success. Now many projects based on Solana are also beginning to pay attention to this. I often ask them: "Who is your chief meme officer?"
Laura Shin: What do you think Solana can replicate Bitcoin's equity investment model? The two are obviously different in asset structure. Will this model be different on Solana?
Jeff Park: Solana is fundamentally different from Bitcoin in structure. Bitcoin has a fixed supply, while Solana has an inflation mechanism, which supports staking and verification node operations, bringing income and flexibility. The core is that the attributes of the assets themselves determine the different ways of measuring their value.
Laura Shin: So you think that Solana's inflation mechanism may make this type of investment tool less attractive than Bitcoin, right?
Jeff Park: It depends on investor preferences. Solana provides direct staking income, while Bitcoin indirectly achieves compound growth through holdings, which are two different income models.
Mark Palmer: It can be viewed from three aspects: First, credit fitness. Bitcoin is easier to evaluate as collateral, and Solana's risk rating is still unstable; second, volatility. Solana is more drastic, which is beneficial to some financial instruments; third, asset productivity. Bitcoin ETF has a clear structure, while Solana relies more on active management companies to release its ecological value, especially when the staking mechanism is not yet clear.
Laura Shin: So you think that even if the asset is valuable, it will be difficult to stimulate market enthusiasm without a chief meme officer, right?
Mark Palmer: Absolutely agree.
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