Allied Gold gets Mali’s go-ahead for new project near Sadiola
Known as Korali-Sud, the new project will be managed under Mali’s new mining code.
(via TheNewswire)
January 7th, 2025 – TheNewswire – Burlington, Ontario
In the Californian Gold Rush of 1848, Samuel Brannan owned the only store between San Francisco and the major gold deposits. According to legend, he bought up all the shovels, picks and pans he could find and ran through the streets of San Francisco shouting "Gold! Gold! Gold on the American River!"
Brannan reportedly bought the pans for ¢20 and resold them for $15 each, making $36,000 in nine weeks.
In today's digital crypto "gold rush", new investment platforms are working on a similar strategy: to provide prospectors easier access to the cryptocurrencies at their fingertips through traditional stocks acting as cryptocurrency proxies.
And many of these "traditional" stocks are outperforming their respective crypto coins.
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Bitcoin deposits
Firstly, why the "digital gold rush" to cryptocurrencies in 2024. The reasons include:
total global cryptocurrency market cap as of December 30, 2024 is US$3.38 trillion, with the value of Bitcoin hitting US$100,000 for the first time on December 4, 2024
On March 26, 2024, the Commodity Futures Trading Commission (CFTC) declared Bitcoin, Ethereum, and Litecoin as commodities in a complaint against the cryptocurrency exchange KuCoin
in his re-election bid, Donald Trump pledged to establish a national strategic crypto stockpile and proposed creating a Bitcoin and Crypto Presidential Advisory Council; he appointed Scott Bessent, a prominent crypto supporter, as US Treasury Secretary; and Trump's supporters include crypto supporters such as Elon Musk, Robert F. Kennedy Jr, as well as Marc Andreessen
Ark Invest CEO, Cathie Wood, forecasts the price of Bitcoin could reach US$1.5 million by 2030
Bitcoin proxy stocks
MicroStrategy's crypto strategy
Traditional companies are now positioning themselves as proxies for investors to gain exposure to cryptocurrencies.
"We're a BitCoin treasury company, so we're securitizing Bitcoin"
— Michael Saylor, Chairman, MicroStrategy
Most notable is the headline strategy deployed by MicroStrategy, an unremarkable software company until it started offering investors exposure to Bitcoin through the company's stock, with astonishing results.
The company uses shares, convertible bonds and leverage to buy more Bitcoin, which has led to the company's stock even outpacing the value of Bitcoin.
MicroStrategy's shares gained 3,200% since adopting Bitcoin as its treasury asset in 2020 to December 2024, by which time MicroStrategy had a market value of approx US$80 billion, while owning US$41 billion of Bitcoin. In particular, the company's stock surged 477% in 2024 as it more than doubled its Bitcoin holding and joined the Nasdaq 100.
MicroStrategy is now the second-largest corporate holder of Bitcoin after it purchased Bitcoin x45 since 2020 for a total of 444,262 Bitcoin, more than 2% of the total 21 million Bitcoin.
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The benefits of investing in traditional stock companies as crypto proxies, instead of directly in cryptocurrencies, include:
familiarity: the New York Stock Exchange opened in 1792, a long history of hundreds of years, giving conventional investors a sense of ease and stability
regulation: publicly traded companies are subject to established regulations, providing a sense of confidence in institutional governance
access: using access products, such as MicroStrategy, investors can gain exposure to cryptocurrencies through their existing brokerage accounts, including the use of options, and so avoid the need for crypto exchanges or digital wallets
convertible bonds: one of the main strategies deployed by MicroStrategy to raise money, to buy more Bitcoin, is to use convertible bonds, allowing investors to benefit from the equity’s upside, while also providing a perceived protection against any downside through the use of bonds
leverage: perhaps best explained directly by Michael Saylor, the Executive Chairman of MicroStrategy, to CNBC "We sold US$1.5 billion of stock, backed by US$500 million worth of Bitcoin, and bought back US$1.5 billion worth of Bitcoin. We captured almost US$1 billion gain in the arbitrage. That we can do with equity, day by day. When we do it with debt, we issue US$3 billion of debt, that's backed by US$600 million of Bitcoin, it comes due in 5 years, and we pay 0% interest. We buy US$3 billion of Bitcoin and capture the US$2.4 billion in the arbitrage gain upfront. Then, over the course of the next 5 years we double or quadruple the investment because we're buying an asset that's appreciating faster."
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tax efficiency: in some jurisdictions, holding equities of crypto may offer tax advantages (eg TFSAs)
security: the risk of losing private keys to crypto and your account is significantly reduced
Not just MicroStrategy, not just Bitcoin
MicroStrategy is not the only company offering such a proxy strategy. As of December 2024, publicly traded companies held 587,470 Bitcoin, representing 2.8% of the total supply.
BlockMint (TSX.V: BKMT)
BlockMint.ai (TSX.V: BKMT) is one emerging company that, not only already holds Bitcoin from prior mining operations, but is actively evaluating the expansion of its cryptocurrency holdings to create an access product for investors — and, unlike MicroStrategy, holding not just Bitcoin, but other currencies as well.
BlockMint Technologies Inc. integrates distributed ledger technologies across a range of innovative applications to support decentralization, with a particular focus on carbon credits and cryptocurrency mining. For example, their Minter Browser allows users to mine cryptocurrency to earn carbon credits and offset greenhouse emissions as they browse the internet.
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The global value of tokenized illiquid assets is forecast to increase in value from a base of US$0.3 trillion in 2022, to approximately US$16 trillion by 2030.
“In our view, the incoming U.S. administration and their positive stance on crypto has created a backdrop that we believe is incredibly bullish for our sector. It will accelerate the institutional acceptance of crypto currencies as a legitimate and desirable asset class.
We have begun to explore the possibility of adopting a business model similar to MicroStrategy’s Bitcoin investment model but for other blockchain currencies. We are exploring acquiring tokens for platforms such as Dogecoin, Avax and Sonic (formerly Fantom). We believe that the potential for the creation of an access product for these or other emerging protocols can serve as a means of value creation for our shareholders
— Dan Beck, CEO, BlockMint
Not just Bitcoin
As BlockMint's strategy highlights, a key consideration when investing in cryptocurrency proxies is to check which cryptocurrencies the stock offers exposure to; for example, MicroStrategy focuses on Bitcoin, BlockMint is considering Dogecoin, Avax and Sonic (formerly Fantom)
Each cryptocurrency will have its own unique characteristics, but some of the main factors to consider are:
scarcity: to what degree does the cryptocurrency offer an attractive store of value
institutional adoption: how significant are the holdings of the cryptocurrency by institutions, and so offering a level of ease and legitimacy for conventional investors
ecosystem: how large and engaged is the community surrounding the cryptocurrency, including investors, applications, and other use-cases and financial products
technology: is the tech behind the currency secure and scalable, as well as providing additional functions, for example, Ethereum's modular and programmable blockchain allowing smart contracts
Some of the other major and emerging players include:
Marathon Digital
Marathon Digital (NASDAQ: MARA) is the largest, publicly listed Bitcoin miner on the NASDAQ with more than 245,000 active mining machines. In 2024, announced was (re-)adopting a strategy of buying and holding Bitcoin in open market purchases — and, by December 10, 2024, owned 40,435 Bitcoin.
For example, on December 4, 2024, the company announced the completion of US$850 million offering of zero-coupon convertible senior notes due 2031, to be used primarily to acquire Bitcoin.
Due to its mining operations and direct investment in Bitcoin, the company can act as a crypto proxy. However, crypto mining is a highly capital and energy intensive investment, and the stock has not performed, relatively-speaking, as well as MicroStrategy, with less overheads, in 2024.
Spirit Blockchain
Spirit Blockchain Capital Inc. (CSE: SPIR), a Canadian digital asset management and blockchain technology company, announced the purchase of Dogecoin Holdings in November 2024 as part of a strategy to develop and expand the ecosystem — to become the MicroStrategy of Dogecoin, but with an alternative range of digital assets.
“We are going to hold a significant balance sheet of Dogecoin over the coming months and coming years,” Lewis Bateman, Spirit Blockchain CEO, told Decrypt in an interview.
In early 2025, the company announced a new strategic initiative to leverage yield on its Dogecoin holdings, and serve as a model for future cryptocurrency yield strategies, including Bitcoin, Ethereum, Tether, and Solana, etc.
Coinbase
Coinbase Global, Inc. (NASDAQ: COIN) is one of the largest cryptocurrency exchanges in the world, offering investors access to cryptocurrency trading and adoption, making it a proxy for exposure to the wider crypto market, without necessarily having to directly hold crypocurrencies.
Riot Platforms
Riot Platforms, Inc. (NASDAQ: RIOT), formerly known as Riot Blockchain, is a Bitcoin mining company that operates the largest-scale mining facility in North America, and also holds (as of December 13, 2024) an estimated 16,728 Bitcoins. This strategy allows the company, similar to Marathon Digital, to provide investors with exposure to both Bitcoin mining and ownership.
On December 9, 2024, Riot announced the closing of US$594.4 million, with much of the proceeds already deployed to acquire additional Bitcoin.
Volatility
As with investing in any equity or commodity, there are risks, and — especially due to market volatility over regulations, technological risks, commodity concentration, crypto valuations, etc — this is particularly the case with stocks so closely linked to the corresponding value of cryptocurrencies.
There are concerns the factors driving up the leveraged stock prices, could just as easily go into reverse if the value of the corresponding cryptocurrency falls sharply.
For example, on December 26, MicroStrategy's stock price were down nearly 45% from its peak since the announcement of the inclusion on the Nasdaq 100.
However, this volatility is something that Michael Saylor highlights is essential to Bitcoin's success:
"It [Bitcoin] will remain volatile because it remains a 24/7, 365 global asset. You can panic sell it on Saturday night, you can enthusiastically buy it on Sunday morning. That's a feature, not a bug."
Welcome to MicroStrategy 2.0
In the Gold Rush of 1848, it was not necessarily the people who found the gold that made the real riches, but the people who sold the shovels.
Companies like MicroStrategy and Spirit Blockchain, as well as emerging players such as BlockMint.Ai, are offering the prospectors of the new gold rush digital pickaxes.
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