Smaller public companies holding Bitcoin have failed to replicate MicroStrategy's success. Their model depends on Bitcoin's price rising consistently to allow for more debt issuance and acquisitions. The recent sideways market has broken this flywheel, collapsing their valuations into 'Bitcoin penny stocks.'

Publicly traded companies holding digital assets like Ethereum (FGNX) or Bitcoin (MicroStrategy) serve a specific purpose: they offer a bridge for hedge funds, asset managers, and family offices whose mandates prohibit direct crypto ownership but permit holding equities.

Drawing parallels to closed-end funds, Berkshire Hathaway, and well-managed banks, analyst Andy Edstrom argues against high MNAV (multiple of net asset value) multiples for Bitcoin treasury companies. Historical precedent suggests these firms should trade between a slight discount (0.8x) and a modest premium (2-2.5x MNAV), not the extreme valuations seen previously.

Analyst Andy Edstrom categorizes most Bitcoin treasury companies, excluding MicroStrategy, as "dumpster fires." He attributes their failure to inexperienced CEOs, reporting issues, a lack of cash flow to service debt, and consequently, catastrophic stock price collapses of 80-95% from their peaks.

Applying Conway's Law to venture, a firm's strategy is dictated by its fund size and team structure. A $7B fund must participate in mega-rounds to deploy capital effectively, while a smaller fund like Benchmark is structured to pursue astronomical money-on-money returns from earlier stages, making mega-deals strategically illogical.

A proposed mental model frames MicroStrategy's issuance of preferred stock as analogous to Tether issuing stablecoins. Instead of using treasuries, MSTR uses heavily over-collateralized Bitcoin (e.g., 5-to-1 ratio) to create a yield-bearing, dollar-denominated instrument, effectively securitizing its Bitcoin holdings to generate returns for equity holders.

Instead of simply holding Bitcoin, MicroStrategy layered on complex debt instruments like preferred stock. This convolution made it difficult for investors to understand the true risk and preference stack, contributing to the stock trading at a discount to its own assets when sentiment turned. Simplicity is safer.

In the hybrid capital market, the ability to deploy capital at scale is a significant competitive advantage. While many firms can handle smaller $20-40 million deals, very few can quickly underwrite and commit to a $500+ million transaction. This scarcity of scaled players creates a less competitive, inefficient market for those who can operate at that level.

For a multi-trillion dollar manager, agility isn't about small trades but leveraging scale for superior market access and research. The key is acting early to identify risks or opportunities before liquidity dries up, effectively using information advantages to front-run market stress.