How to Make a Bitcoin 𝖳̶𝗋̶𝖾̶𝖺̶𝗌̶𝗎̶𝗋̶𝗒̶ Mint: Print Equity
How Wall Street Turned Scarcity into Credit Again
TL;DR: Bitcoin is in the process of re-centralizing sound money collateral, but not by government decree (6102). Rather, it’s happening through voluntary financial structuring: whales swap spot BTC for Bitcoin Equity Entity (BEEs) or claims in Bitcoin Treasury Companies. This pushes ownership from individuals back into the hands of corporates and corporate balance sheets.
A Change To Bitcoin’s Structure: For some time, it has been clear in Bitcoin’s price charts that its structure has changed.
Bitcoin’s behavior has changed, hence the title choice. A subtle play on words for two reasons: 1) The original Bitcoin white paper (1996) that supersedes Satoshi’s white paper (2008) by 12 years, and 2) today’s Tether Digital Federal Reserve-like entity, along with Bitcoin Treasury Companies (BTC-TC) doing their best impression of printing like the US Federal Reserve.
Without question, it’s a regime change and a monetary order change. The future will be much different than our recent past.
If we were to follow the money, we could see that bankers have co-opted Bitcoin. We’ve witnessed a takeover. One led by prominent Bitcoin influencers who spun up podcasts and marketing flywheels for a sweetened piece of Private Investment in Public Equity (PIPE) deals in Bitcoin Treasury Companies before their launch.
All under the new narrative of “Digital Credit” or at the expense of the challenges of self-custody.
While it’s true that Bitcoin doesn’t care, it’s also true that Bitcoin coders do care… about fiat money.
All banking crises are different, but when all else fails, bankers rely on one weakness common in all of human nature. People can be bought. People can be enticed with money. Knowing that everyone has a price for which they can be bought, in difficult battles, bankers lean heavily on their most powerful tool: an endless supply of fiat currency.
So, if we know there are only 21 million Bitcoin and we know about 95% have been mined. Then how could a BTC-TC get funded anyway? Hypothetically speaking, of course.
If demand for spot Bitcoin is greater than daily mined supply, then how does one get access to enough Bitcoin to fund both massive Bitcoin ETF inflows and numerous launches of Bitcoin Treasury Companies? And, this is all before we consider the amount of Bitcoin that Strategy and Michael Saylor have been siphoning off.
The Cause, BTC-TCs Need Inventory: So how exactly could you fund a Bitcoin Treasury Company?
By convincing a holder, holders, whale, or whales to sell, of course. But that doesn’t fit the Maximalist narrative.
Remember, you never sell your bitcoin, right? Well now, that was before you could swap your Bitcoin for an equity token or Bitcoin Equity Entity (BEEs). Before Bitcoin bent to TradFi, actions > narratives, fiat was the enemy. It turns out, based on actions, maybe the feeling of being left out of fiat returns was the actual enemy? The goalposts have widened, and now, as long as you get a better fiat return, it seems okay to swap your Bitcoin.
The Mechanism: Structured Finance & SPVs
Let’s play a game of what if. A game of speculation.
If I were to consider setting up a Treasury company, how would I go about it? How would I get the Bitcoin? Who has the most supply? OG whales, right?
If the whales are truly Bitcoin Maxi’s, they’ll never sell, right? Wrong, if they can swap.
Because everyone has daily financial needs that revolve around mortgages, cars, and family. More importantly, all of these things still transact in good old-fashioned USD. If enough pressure is applied, anyone can be bought (see Core or Bitcoin’s Blocksize Wars / New York Agreement). The Blocksize War already proved Bitcoiners will compromise when pressure is applied and incentives are aligned (video below).
So, what better to entice a whale with than dollars? Especially if you offer him a place within the club. The one he used to vehemently be against, a system that relied on leverage and fractional reserve.
The critical thing to understand with money is that it’s supposed to be boring.
However, in recent years, the growing and common complaint about Bitcoin was that it was too boring. Sounds like perfect money… at least, until wizards and bankers invaded. There is definitely a place for shiny things and rug-pull type scenarios, but not at the base layer. That’s where First Principles live.
How Could an SPV, a Market Maker, and a Whale Fund a Treasury?
Again, merely speculation, but how could I transfer OG Whale Bitcoin to a BTC-TC?
If I were a market maker or a small boutique Bitcoin “banking” entity, and I wanted to help move away from self-custodied Bitcoin into centralized Bitcoin. Then, I’d probably set up a Special Purpose Vehicle. A bankruptcy remote entity, i.e. a trading desk to make the market. In this way, I’d have the expertise and the perfect structure to facilitate a swap. After that, I’d need to find plenty of Bitcoin. Say, maybe $8 Billion , $2.7 Billion, or $1.48 Billion of whale Bitcoin, plus some. I’d need to scroll through the Rolodex of primary stakeholders I’d spent a few years gathering.
I’d used structured financing to lock in spot Bitcoin, even at a slight premium, so to lock in collateral at a high valuation. This collateral could then be used to fund said Bitcoin Treasury Companies, and it may or may not be helping the BTC-TC come to market via PIPE deals.
The SPV would lend or contribute the BTC to Treasury Cos at pre-arranged terms. BTC-TCs get Bitcoin below market price, the SPV gets equity upside and preferred yield (swaps for TradFi Equity Tokens, BEEs) for facilitation, along with other possible fees (rent seeking).
In the end, the Whale never “sells” the Bitcoin to the SPV for fiat/USD but maintains a proxy position to Bitcoin that can be held in a KYC/AML traditional financial brokerage account. In this case, there is no realized gain/loss, and the newly minted money can be borrowed against without any hassle.
A very important point to note is that the mark-to-market (MtM) volatility is absorbed by the structured debt/equity offering, not P&L. So, the transactions don’t really show in Bitcoin’s price structure.
In short, the “loss” isn’t your typical cash loss but a temporary MtM drawdown on collateral. (see MSTR report of $32.60 of EPS in July and $8.42 of EPS in October). The “loss” is offset on three fronts or some combination, depending on the terms of the deal:
a) Cheaper pre-arranged financing locked in at the top
b) Preferred equity or PIPE in Treasury Cos
c) Optionality to repurchase/restructure or create a new security to fund the gap
Make the swap, avoid tax challenges, and remove the pain or concern of self-custody (once the central tenet of Bitcoin).
All this, for a piece of a new TradFi shell that centralizes Bitcoin, gives bankers back the power, and effectively creates a 6102 type of event without actually needing the government to step in, like in 1933.
Financing Vehicle
The SPV issues BTC-backed notes to institutional investors while BTC > $110-115k with a SOFR backed coupon and a haircut in the 30–40 % range.
$100k notional BTC = say $60–70k debt
Investors are long synthetic BTC, get yield and seniority in the new Bitcoin Equity Entities (BEEs) or Bitcoin Treasury Companies. The SPV gets leverage 1.6–1.9x with no equity down (115k/60k). The reflexive nature of equity markets, dominated by headlines and podcast influencers generating additional FOMO, pushes leverage (mNAV) up to bubble levels. This provides additional liquidity (Fed-style Printing) via At The Market (ATM) sales. For an investor holding 6-10 years, it’s probably good. For one looking for a buzz of short-term gains, it’s likely bad. Pick any Treasury Co. this year, and you will see the pain in the charts.
Custody & Legal
SPV holds BTC in cold storage, multi-sig, insured, and bankruptcy-remote from the market-making parent. Eliminates counterparty risk for noteholders. Transfers a bulk of future gains from the spot holder to the C-Suite of the Treasury Co.
Call Option
The notes give the issuer call rights at par, and gives the SPV optionality to refinance cheaper in drawdown. The result: SPV owns 1 BTC for $60-70k of debt rather than having to convince a whale to part with bitcoin and pay $115k cash. The whale effectively swaps holdings for BEEs and is made even or given juice via the discount.
Deploying BTC into Treasury Cos Without Selling
For making the market and gathering the Bitcoin, the SPV contributes 1 BTC to Treasury Co in exchange for Converts, Preferreds, etc. with:
8–12 % paid in kind (PIK) dividend
2–3× liquidation preference
Conversion at say $80k BTC strike
The SPV gets yield and equity kicker. There is no Bitcoin sale, hence no tax event.
Another Angle: Collateralized Loan
The SPV lends 1 BTC at a loan-to-value (LTV) %. The loan carries a high interest rate of say 12 %, plus a profit share of say 20 %. An arbitrage very common in hedge fund and private equity land.
If Treasury Co repays the loan in fiat, the SPV gets principal + carry (interest). If the BTC-TC defaults, shareholders are wiped out, and the SPV keeps the Bitcoin. As is typical in finance, the equity holder (ex-Bitcoiner in this case) is burned, and management (bankers) make off with the profits and collateral (Bitcoin).
The latter is an important point because Bitcoin dropping is most likely the only case of a BTC-TC failing, other than extremely bad management. Like Below.
What’s in it for the Seller?
The Incentive: For the Bitcoin Seller at >$110k, instead of selling fully for fiat and facing the taxes, they are swapping BTC for a synthetic or structured claim on Bitcoin and the Treasury ecosystem.
A Quiet Re-Centralization: In short, it’s a bet on treasury companies more than a bet on Bitcoin. Granted, all sound money is eventually corrupted. Events of this nature are common and expected. Most people are more willing to bet on someone else holding the keys than they are on themselves. Kind of odd for Bitcoin, but this is how sound money becomes unsound. Gold crossed this chasm many moons ago.
Effectively, the seller is focusing on yield over growth, a common fiat-banking mentality and mantra. By swapping Bitcoin, one takes on multiple additional layers of risks compared to holding spot: counterparty risk, equity market risk, and switches to an equity-linked instrument instead of holding idle, native Bitcoin. Additionally, a seller is giving over collateral, control, and power to a third party.
A Simple Summary
In a hypothetical world, this is how one could issue 1.5× leveraged, BTC-backed notes at a cycle top, acquire Bitcoin without cash by offering equity and capital structure stakes.
As price corrects, the BTC-TC can contribute/lend their newly acquired spot BTC to other treasury Cos, traditional banks, and/or other shadow banks, in exchange for 8–12 % preferred + 2–3× liq pref.
The temporary mark-to-market losses can somewhat be ignored as long as the collateral stack is truly “over collateralized”. When the tide goes out (Bitcoin drops) we will find out the level of collateralization in each. MtM values are offset by structured equity upside, delivering >30 to 60 % IRR to the SPV and BTC-TC management (not diluted equity shareholders). A BTC seller is given yield + governance instead of idle coins. No realized loss, no tax event, fully hedged but with new risk vectors.
Bitcoin seizure leads to collateralization. Collateralization gives control to those who issue credit, not those who hold the keys.
Disclaimer: Nothing in this post is to be considered financial advice. It is only an opinion and a hypothetical view for educational purposes only.
Superb article.