Crypto Assets Entering Corporate Balance Sheets: A Comprehensive Analysis of Economic Models

Author | Mario Chow @IOSG

Introduction

By mid-2025, an increasing number of publicly traded companies will begin to incorporate cryptocurrency (especially Bitcoin) into their treasury asset allocation, inspired by the successful case of Strategy ($MSTR). For example, according to blockchain analysis data, in June 2025 alone, 26 new companies will have added Bitcoin to their balance sheets, bringing the total number of companies holding BTC globally to approximately 250.

These companies span multiple industries (technology, energy, finance, education, etc.) and different countries and regions. Many companies view Bitcoin's limited supply of 21 million as a hedge against inflation, emphasizing its low correlation with traditional financial assets. This strategy is quietly becoming mainstream: as of May 2025, 64 companies registered with the SEC collectively held approximately 688,000 BTC, accounting for about 3-4% of the total Bitcoin supply. Analysts estimate that over 100-200 companies globally have incorporated crypto assets into their financial statements.

model of crypto asset reserves

When a public company allocates part of its balance sheet to cryptocurrency, a core question arises: how did they finance the purchase of these assets? Unlike traditional financial institutions, most companies adopting a crypto treasury strategy do not rely on a cash-rich core business to support them. The following analysis will use $MSTR (MicroStrategy) as the main example, as most other companies are actually replicating its model.

Operating Cash Flow

While theoretically the "healthiest" and least dilutive way is to purchase crypto assets with the free cash flow generated by the company's core business, in reality, this method is almost impractical. Most companies themselves lack sufficiently stable and large-scale cash flow, making it impossible to accumulate a significant reserve of BTC, ETH, or SOL without relying on external financing.

Taking MicroStrategy (MSTR) as a typical example: the company was founded in 1989 and originally focused on business intelligence software, with its main products including HyperIntelligence, AI analytics dashboards, and others. However, these products have only generated limited revenue to this day. In fact, MSTR's annual operating cash flow is negative, which is far from the hundreds of billions of dollars it has invested in Bitcoin. This shows that MicroStrategy's cryptocurrency treasury strategy has never been based on internal profitability, but rather relies on external capital operations.

A similar situation occurred at SharpLink Gaming (SBET). The company transformed into an Ethereum vault vehicle in 2025, acquiring over 280,706 ETH (approximately $840 million). Clearly, it could not rely on the revenue from its B2B gaming business to accomplish this. SBET's capital formation strategy primarily relies on PIPE financing (Private Investment in Public Equity) and direct stock issuance rather than operational revenue.

Capital Market Financing

Among publicly listed companies that adopt a crypto treasury strategy, the most common and scalable approach is through public offering, raising funds by issuing stocks or bonds, and using the proceeds to purchase cryptocurrencies such as Bitcoin. This model allows companies to build a large-scale crypto treasury without utilizing retained earnings, fully leveraging traditional capital market financial engineering methods.

Issuing Stock: Traditional Dilutive Financing Case

In most cases, issuing new shares comes with costs. When a company raises funds through a stock issuance, two things usually happen:

1. Ownership is diluted: The shareholding ratio of existing shareholders in the company decreases.
2. Earnings per share (EPS) decline: An increase in total share capital leads to a decrease in EPS while net profit remains unchanged.

These effects often lead to a decline in stock prices, primarily for two reasons:

• Valuation logic: If the price-to-earnings ratio (P/E) remains unchanged while EPS declines, the stock price will also fall.

• Market Psychology: Investors often interpret financing as a sign that a company lacks funds or is in distress, especially when the raised capital is for unproven growth plans. Additionally, the influx of new stocks into the market can create supply pressure that lowers market prices.

An exception: MicroStrategy's anti-dilution equity model

MicroStrategy (MSTR) is a typical counterexample to the traditional narrative of "equity dilution = shareholder loss." Since 2020, MSTR has actively purchased Bitcoin through equity financing, with its total outstanding shares growing from less than 100 million to over 224 million by the end of 2024.

Despite the dilution of equity, MSTR often outperforms Bitcoin itself. Why? Because MicroStrategy has long been in a state where its market value exceeds the net value of its held Bitcoin, which we refer to as mNAV > 1.

Understanding Premiums: What is mNAV?

• When mNAV > 1, the market values MSTR higher than the fair market value of the Bitcoin it holds.

In other words, when investors gain exposure to Bitcoin through MSTR, the price they pay per unit is higher than the cost of directly purchasing BTC. This premium reflects the market's confidence in Michael Saylor's capital strategy and may also represent the market's belief that MSTR provides leveraged, actively managed exposure to BTC.

Support of traditional financial logic

Although mNAV is a crypto-native valuation metric, the concept of "trading price above underlying asset value" has long been prevalent in traditional finance.

The reasons why the company often trades at a price higher than its book value or net assets are mainly as follows:

#Discounted Cash Flow (DCF) Valuation Method

Investors focus on the present value of the company's future cash flows, rather than just the assets it currently holds.

This valuation method often leads to a company's trading price being much higher than its book value, especially in the following situations:

• Revenue and profit margin expected to grow
• The company has pricing power or a technological/commercial moat.