Start the global arbitrage game? One article unveils the mystery of volatility hunter 21 Capital

Source: Why Twenty One Capital Is More About Volatility Than Bitcoin

Organize & compile: Daisy, ChainCatcher

Editor 's note:

This article is compiled from an in-depth conversation from the crypto podcast Unchained, with host Laura Shin and two guests, Jeff Park (former Jump Trading investor, current 21Shares investment director) and Mark Palmer (Bitwise analyst). The topic focuses on 21 Capital, a new Bitcoin holding company co-founded by Tether, SoftBank, Bitfinex and Cantor, with the goal of increasing Bitcoin holdings per share (BPS) and Bitcoin return rate (BRR), which is seen as a new attempt to "corporate" route after MicroStrategy.

The dialogue revolves around four core points: the behavioral logic of strategic investors, the reconstruction of Tether and global capital structure, the arbitrage path of Japanese funds and US bonds, and whether Solana has the possibility of replicating the Bitcoin financialization model. The content covers multiple levels such as macro-financial trends, capital structure design, investment preference differences and narrative capabilities.

The following content is the compilation and compilation of the interview.

TL;DR:

1. Strategic investors focus on volatility rather than profit, 21 Capital's stock price pricing logic is based on volatility realization.
2. 21 Capital’s establishment marks a new stage of Bitcoin’s corporatization, jointly initiated by several international institutions.
3. Tether is a beneficiary of US dollar arbitrage, and SoftBank represents Japan's long-term suppression of capital, and both achieve global arbitrage through Bitcoin.
4. The U.S. regulatory environment is shifting toward pushing institutional entry, and stablecoins and digital asset legislation is seen as a key window.
5. Investors’ choices are not only based on product structure, but also reflect values ​​and narrative preferences (Saylor vs Mallers).
6. Solana's financialization path has structural differences, and inflation mechanisms, pledge models and asset credit do not have the comparability of Bitcoin.

**Strategic companies do not look at profits, but rely on volatility to

price**

Laura Shin: Tether, Bitfinex, SoftBank and Cantor Equity Partners jointly founded Bitcoin Holdings 21 Capital, which operates similar to MicroStrategy. The company initially holds 42,000 Bitcoins with a market value of approximately US$4 billion, making it the third largest Bitcoin corporate holder in the world, with the goal of increasing Bitcoin holdings per share (BPS) and Bitcoin return rate (BRR). What was your first reaction when you heard this news? Jeff, please share first.

Jeff Park: My first reaction was shock. 21 Capital’s institutional background is very special, symbolizing the convergence of multiple global forces such as politics, economy, capital and social capital on Bitcoin. Led by Jack Mallers, this is a major cross-generational and cross-field cooperation, marking the world's reconstructing the financial order around Bitcoin and a critical moment in the history of crypto development. Currently, many strategic investors do not pay attention to profits, and financial reports have limited impact on stock prices. Investors who buy CEP stocks at a triple premium care more about the returns brought by volatility than the traditional profit model.

Laura Shin: Mark, what do you think?

Mark Palmer: This is an affirmation of Michael Saylor's strategy. He was the first to raise funds to buy Bitcoin through the capital market in 2020. Although he was questioned, he has now become an industry paradigm. New players such as 21 Capital can learn from MicroStrategy's experience, avoid financing mistakes, and continue effective practices to promote further evolution of strategies.

Tether, SoftBank and Bitcoin: A Global Arbitrage Game

Laura Shin: Tether may be the world's most profitable company with a profit of $13 billion in 2024. Against the backdrop of a possible downward trend in interest rates, it may have hit a profit high. Now becoming the largest shareholder of 21 Capital, does this mean that its strategic direction is changing?

Mark Palmer: Tether promotes revenue diversification as a reasonable choice. Although the new business has no direct connection with stablecoins, this transformation is forward-looking considering the possible stablecoin regulation in the United States. Tether has stated that it is possible to set up a new business unit for the U.S. market. Finding a more friendly operating environment is a wise move between regulatory pressures and global expansion.

Jeff Park: Tether is the new beneficiary of the hegemony of the US dollar. It earns interest by holding US bonds without paying interest to the fund holders, which can be regarded as a currency loophole. Its combination with Bitcoin reflects global capital's demand for secure assets outside the U.S. system, and 21 Capital's structure reflects this. Tether is also promoting projects such as Plasma, trying to expand stablecoin functionality based on Bitcoin. This is an important step towards diversification. The ultimate goal is to realize real financial benefits through the Bitcoin standard and reinject profits into the Bitcoin ecosystem, which has far-reaching significance to the entire community.

Laura Shin: Jeff, you mentioned in the investor memorandum that Tether is the 21st century euro dollar. Can SoftBank’s participation be briefly explained in detail the historical and geopolitical background behind this judgment?

Jeff Park: Tether's cooperation with SoftBank constitutes an ideal capital structure. SoftBank represents long-suppressed Japanese capital, accustomed to seeking growth through high-risk investments, such as AI, ARM, and WeWork. Masayoshi Son calls it the "300-year plan." Tether is the biggest beneficiary of global financial suppression, making profits through US debt arbitrage. The combination of the two represents the cooperation between the capital importer and the capital harvester, and Bitcoin is their common bridge. In the future, similar "public-private joint venture" structures will increase, and they integrate sovereign capital and can avoid political risks. The triangular structure composed of Tether, SoftBank and Cantor is an efficient and flexible capital collaboration model.

Laura Shin: You mean, Japanese capital is looking for overseas growth, and Tether can export the dollar to these demanders, the key is that it is not regulated by the United States, right?

Jeff Park: That's right. Tether and Japan are both major buyers of US debt, but the profit methods are different: Tether directly earns interest, while Japan relies on interest rate spreads to allocate global assets. Bitcoin has become the common countermeasure between the two under the expectation of downward interest rates. Tether needs to find new sources of profit, SoftBank needs to release long-term suppressed capital, and Bitcoin just meets the needs of both parties. MicroStrategy has opened up a leveraged financing channel for Bitcoin, and introducing low-interest funds from Japan to invest in Bitcoin will be a global arbitrage and a path that Saylor has not yet achieved.

Laura Shin: Mark, how do you view Jeff’s analysis?

Mark Palmer: I agree completely. The core of global finance is to match capital seeking returns with assets with profit-capacity. Whether Tether can connect with Japanese capital depends on whether the institutions are willing to enter the market. The crypto market was dominated by retail investors in the past, and institutions waited and watched because of unclear supervision. If the United States passes stablecoins and digital asset legislation, institutional funds will flow in. Now is the critical time for global capital layout encryption.

Saylor vs Mallers: Are you investing in Bitcoin or faith?

Laura Shin: Some people think SoftBank’s return to the crypto market may be the top signal, especially considering that Masayoshi Son lost $130 million in Bitcoin investment in 2017. What do you think?

Jeff Park: Many people who enter the crypto market for the first time experience losses, but this often makes them more determined in the future. Masayoshi Son is a typical macro trader, and the Vision Fund itself is a macro platform. His early failure does not mean that he will not succeed now. Today, the world's top macro investors such as Druckenmiller and Dalio have all entered Bitcoin, and the market environment is also completely different from 2017. SoftBank is good at leverage operations, and if it combines its capabilities with Bitcoin, it has great potential.

Mark Palmer : That’s right, the market was not yet mature in 2017–2018, and many people lost money. Nowadays, institutional participation is more rational. Although Bitcoin is still speculative, its foundation has been greatly improved.

Laura Shin: Finally, let’s talk about Cantor. What do you think of its strategic role in listing and financial operations?

Mark Palmer: Cantor's involvement reflects a shift in Wall Street's attitude toward encryption. In the past, we waited and watched because of unclear supervision, but now policies have turned to friendly, banks can participate more with peace of mind while protecting the interests of customers. Changes in the regulatory environment create opportunities for them.

Jeff Park: I totally agree. Cantor is the bridge connecting the United States with global capital. In the context that neither Tether nor SoftBank is under U.S. regulation, Cantor has achieved binding to U.S. interests. This is also one of the reasons why Tether chose to work with Japan's SoftBank. As important allies, the United States and Japan closely combine Bitcoin financialization with geostrategic strategies through the triangular structure formed by Tether, SoftBank and Cantor.

Laura Shin: We talked about geopolitics, regulatory changes and market stages. What do you think about the entry timing of 21 Capital? What is the difference compared to the launch of MicroStrategy back then?

Jeff Park: The entry of MicroStrategy in 2020 Bitcoin is on the rise of the epidemic and inflation concerns. The entry of institutions such as PayPal and DeFi have become an ideal time. Bitcoin surged sharply in 2021, verified this decision. Now that the regulatory environment in the United States is about to change, institutional funds are expected to enter the market, it is a very favorable time for 21 Capital to enter the market.

Mark Palmer: The epidemic and easing policies in 2020 have caused people to be uneasy about fiat currency, so Saylor turned to Bitcoin. Japan is now experiencing a similar awakening. Although it has been cooperating with the global order for a long time and maintaining the depreciation of the yen, the United States has accused of manipulating the exchange rate, which has aroused domestic disgust and policy reflection. Bitcoin has once again become a hedging tool, and this transformation is exactly the same as it was back then.

Laura Shin: Although it does not constitute investment advice, how do you think of the Bitcoin spot ETF, MicroStrategy and 21 Capital suitable for each of these products?

Jeff Park: The key is whether to accept leverage risks. MicroStrategy and 21 Capital provide Bitcoin leverage exposure, with higher returns when rising and greater volatility when falling; ETFs are closer to spot and less volatility. Firmly bullish Bitcoin investors can consider leveraging tools for higher returns.

Mark Palmer: Investment choices not only depend on the product itself, but values ​​are also critical. Some agree with the American philosophy represented by Saylor, while others prefer the technical orientation and youthful vision embodied by Jack Mallers. 21 Capital has international capital behind it and may not be regarded as a "pure American company." When the difference in returns narrows, cultural identity and concept matching often determine the final choice.

Can Solana be financialized? Difficult to copy Bitcoin route

Laura Shin : Among the many Bitcoin companies, which strategy or company do you think is more likely to win?

Mark Palmer: Winners will be those companies that create the biggest volatility with minimal capital. In an era of highly structured finance, market preferences for volatility. MicroStrategy's capital structure is relatively complex, while 21 Capital focuses on a simple structure. If it can bring higher volatility, the market may prefer it.

Jeff Park: I agree. Volatility is key, but the path can be different. MicroStrategy expands financing channels and adapts to different investment preferences, such as convertible bond arbitrage funds. By contrast, 21 Capital chose a cleaner structure. Ultimately, it depends on who the investors are willing to follow—is Saylor or Mallers. Jack Mallers also have technical and financial capabilities, and also has the influence of "evangelists".

Mark Palmer: In today’s market, storytelling ability is crucial. Saylor is good at winning resonance with words and metaphors, which is also an important factor in the success of the company. Now many Solana-based projects are starting to take this seriously, and I often ask them: “Who is your chief Meme officer?”

Laura Shin: What do you think about whether Solana can replicate Bitcoin’s equity investment model? The two have obvious differences in asset structure. Will this model perform differently on Solana?

Jeff Park: Solana has essential structural differences with Bitcoin. Bitcoin has a fixed supply, while Solana has an inflation mechanism that supports staking and verification node operations, which can bring benefits and flexibility. The core is that the attributes of the asset themselves determine the different ways of measuring its value.

Laura Shin: So you think Solana's inflation mechanism may make this type of investment vehicle less attractive than Bitcoin, right?

Jeff Park: It depends on investor preferences. Solana provides direct pledge income, while Bitcoin achieves compound interest growth through holding shares, which belongs to two different income models.

Mark Palmer: It can be seen from three aspects: First, credit fitness, Bitcoin as collateral is easier to evaluate, and Solana's risk rating is still unstable; second, volatility, Solana is more intense, which is beneficial to some financial instruments; third, asset productivity, Bitcoin ETF structure is clear, while Solana relies more on active management companies to release its ecological value, especially when the pledge mechanism is not yet clear.

Laura Shin: So you think that even if the assets are valuable, it is difficult to stimulate market enthusiasm without a chief Meme official, right?

Mark Palmer: Totally agree.