Wall Street pulls in record haul off supporting the $100 billion rush for crypto treasuries

Several public companies are driving head straight into digital assets with funds specifically allocated to create treasuries of Bitcoin and other cryptos. After the US Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs in January 2024 to change Wall Street’s perspective on digital assets, institutional total holdings have so far surpassed $100 billion.

Over the past six months, more than 152 publicly traded companies now control more than 950,000 Bitcoins, worth over $110 billion, according to Bitcoin Treasuries.net. 

For some, the motivation lies in diversifying balance sheets, hedging against inflation, or appealing to younger investors. But for others, crypto investment is a means to boost their stock value, which could happen as soon as announcing a treasury.

Bitcoin treasury holdings grow in tandem with institutional adoption

According to Nathan McCauley, cofounder and chief executive of San Francisco-based crypto bank Anchorage Digital, the crypto treasury trend had reached “fever pitch” and “gone fully contagious.” His firm now oversees billions in crypto treasuries, including Trump Media’s $2 billion Bitcoin reserve and a $760 million holding from Nakamoto Holdings.

Nakamoto Holdings, named after Bitcoin’s pseudonymous creator Satoshi Nakamoto, debuted in public markets through a special purpose acquisition company (SPAC) merger with KindlyMD. The small Salt Lake City healthcare operator had been trading below $2 per share before announcing its crypto-focused deal in May. 

Today, the combined entity, listed as NAKA on the Nasdaq, trades over $12 with a market capitalization of over $91 million. KindlyMD issued more convertible bonds worth $200 million this week for more BTC purchases.

Anchorage and Trump family-backed World Liberty Financial, a crypto firm majority-owned by the family, announced a $1.5 billion treasury anchored by its own token, WLFI. That comes in addition to Trump Media’s previously disclosed $2 billion Bitcoin reserve.

However, the undisputed leader in corporate crypto adoption is Michael Saylor’s business intelligence firm Strategy Inc., formerly known as MicroStrategy. Based in Tysons Corner, Virginia, the company was the first entity in the corporate playbook for Bitcoin acquisition, using unconventional financing such as convertible notes and perpetual preferred stock to amass holdings.

Strategy controls Bitcoin worth an estimated $73 billion, with a market capitalization of roughly $95 billion, trading at a 25% premium to its crypto assets. The company’s approach has inspired dozens of copycats, extending beyond Bitcoin into Ether, Solana and other digital assets.

This year alone, corporations have raised more than $98 billion for crypto purchases, with another $59 billion pledged by 139 companies since June, according to Palo Alto advisory firm Architect Partners.

Wall Street banks cash in

Traditional Wall Street banks and broker-dealers are profiting handsomely from underwriting the financing behind these corporate crypto purchases. To many businesses, offerings of preferred stock and convertible notes are reliable revenue streams.

Strategy’s $722 million offering of 8.5 million shares of preferred stock in March brought in an estimated $10 million in fees for underwriters led by Morgan Stanley. A dozen firms participated in the deal.

In July, MARA Holdings, a Fort Lauderdale-based crypto mining company now stockpiling Bitcoin, raised $950 million through convertible notes. Morgan Stanley and other banks are expected to earn a similar $10 million in underwriting fees.

As the number of corporate treasuries grows, crypto custody providers are reaping the benefits. BitGo, a California-based custodian, has signed custody deals with roughly two dozen treasury-focused companies in recent months.

Adam Sporn, head of prime brokerage and US institutional sales at BitGo, told Forbes that treasury services are now “an increasing portion” of its business. He explained the segment barely existed six months ago, but demand helped the firm “confidentially file” for an initial public offering in July.

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