Structural transformation of the cryptocurrency market as indicated by diversification of corporate financial strategies, intensifying ETF competition, and institutional integration

 

Introduction  

The cryptocurrency market is witnessing a surge in new trends that diverge significantly from traditional investment methods. Notable changes are emerging across various fronts, including strategic holdings of cryptocurrencies by corporations, the emergence of innovative financial products, and the establishment of regulatory frameworks. These developments transcend mere speculative movements and are increasingly shaping the new foundation of the digital economy.

This paper will conduct a detailed analysis of recent market trends, examining changes in corporate financial strategies, the evolution of financial products, regulatory developments, and future prospects. We will explore how these changes are impacting the traditional financial system and what opportunities and risks they present for investors and businesses.

Because the author is Japanese, there may be errors in word spelling and grammar. We apologize for any errors.

The Intensification of Corporate Cryptocurrency Strategies

The Rise of Ethereum-Centric Financial Strategies

In recent years, strategic holdings of cryptocurrencies by corporations have been gaining attention, but what is particularly interesting is the expansion of financial strategies centered on Ethereum (ETH). The case of SharpLink Gaming in the US symbolically illustrates this new trend.

As of July 27, the company held 438,190 ETH, marking a significant 21% increase from the previous week. This rapid expansion was driven by the company raising $279.2 million through an At-The-Market (ATM) offering, selling new shares in response to market demand during the week of July 21–25, and using those funds to acquire an additional 77,209.58 ETH (approximately 43 billion yen). The average purchase price was $3,756 per ETH.

Such corporate actions exhibit characteristics distinct from traditional Bitcoin-centric financial strategies. These include the ability to implement more complex strategies leveraging Ethereum's programmability and the presence of ongoing revenue opportunities through staking. In the case of SharpLink, since the commencement of its financial strategy on June 2, 2025, the cumulative rewards obtained through staking have increased to 722 ETH, indicating efficient management of held assets.

The overwhelming scale of Bitcoin strategy

Meanwhile, in the Bitcoin sector, the overwhelming presence of the former MicroStrategy (now Strategy Inc.) stands out. As of July 29, the company holds approximately 628,791 BTC, achieving an astonishing concentration of 62.3% of all Bitcoin held by public companies.

This overwhelming scale is supported by innovative funding methods. Most recently, the company raised $2.521 billion through an IPO of variable-rate Class A perpetual preferred stock stretch (STRC), with nearly the entire amount allocated to Bitcoin purchases. This deal is the largest U.S. IPO since 2025 and marks the largest issuance of listed perpetual preferred stock since 2009, setting a record scale.

What is notable about Strategy's approach is that it positions Bitcoin not as a speculative investment but as a clear financial strategy. The company is promoting a balance sheet model that raises capital in the public market and converts it into Bitcoin reserves, aiming for continuous expansion. This year alone, it has conducted its fourth round of fundraising, demonstrating an aggressiveness that leaves no room for competitors to catch up.

Diversification of Financial Strategies and Introduction of New Indicators

As corporate cryptocurrency strategies mature, there is also a movement to provide investors with clearer evaluation criteria. SharpLink has introduced a new reporting indicator called “ETH Concentration.” This indicator is calculated by dividing the number of ETH held by the company by 1,000 diluted shares outstanding, and this week it rose from 3.06 last week to 3.40. Since the launch of the financial strategy, the metric has risen by 70%, enabling investors to more intuitively grasp the correlation between the company's stock price and its Ethereum holdings.

The introduction of such metrics holds significant implications for the valuation of companies holding cryptocurrencies. This is because it allows the value of cryptocurrency holdings—which was previously difficult to appropriately reflect in traditional corporate valuation methods—to be presented in a manner that is easier for shareholders to understand. Going forward, similar metrics are likely to be adopted by other companies, potentially leading to the establishment of new evaluation standards.

Innovative Financial Products and Leverage Strategies

ETH Strategy's New Approach

In the cryptocurrency market, new financial products are emerging that pursue leverage effects while mitigating traditional risks. “ETH Strategy” has raised 12,342 ETH (approximately $46.5 million) in its pre-launch phase and is attracting attention as a project that provides leveraged investment opportunities in ETH through STRAT tokens without the traditional risks of margin liquidation or volatility.

A key feature of this project is its adoption of a mechanism similar to the ATM method used in other projects such as Strategy's bond mechanism and SharpLink. By selling new shares in response to demand and using the proceeds to purchase ETH, the project aims for sustainable growth through a cyclical structure.

Fundraising was conducted through three channels: 6,900 ETH in a private presale, 1,242 ETH in a public sale, and an additional 4,200 ETH through a mechanism called “puttable warrants.” The majority of the raised funds, totaling 11,817 ETH, will be utilized for ETH staking and providing liquidity to the protocol, serving as a foundation to support the system's stability and growth.

Intensifying competition in the ETF market

The ETF market is seeing fierce competition, particularly for Ripple (XRP)-related products. Teucrium's “2x Long Daily XRP ETF (XXRP)” recorded a record daily inflow of $50.4 million on July 21, achieving a cumulative net inflow of $323.6 million. This represents 52.5% of the total inflows of 616 million dollars into XRP-linked ETFs in the United States.

Competitor Volatility Shares' products are also performing well, with the non-leveraged “XRPI” seeing a 27% increase to 33.6 million dollars in inflows last week, and the 2x leveraged “XRPT” seeing a 26% increase to 43.6 million dollars in inflows. These figures indicate growing demand among investors for Ripple-related products.

However, it is important to note that all XRP-related ETPs currently traded in the U.S. are linked to derivatives such as futures, and the SEC has not approved spot ETFs. Nevertheless, the capital inflows into these products reflect the high level of institutional investor interest in cryptocurrencies.

Introduction of the Physical Redemption System

As a significant institutional change in the ETF market, the SEC has approved the establishment and redemption of physical Bitcoin and physical Ethereum ETFs in physical form. Under this “physical contribution and redemption” system, large financial institutions known as authorized participants (APs) can now use the underlying assets, such as BTC and ETH, directly instead of cash when creating or redeeming ETP beneficiary securities.

This change is primarily structural and does not directly alter the trading methods of retail investors. However, behind the scenes, APs can now directly manage cryptocurrencies, enabling cost reductions, narrower spreads, and more efficient portfolio management, particularly in volatile markets. SEC Chairman Paul Atkins has stated that this approval will benefit investors by making the product more cost-effective and efficient.

Regulatory Environment and Policy Trends

Recognition of Cryptocurrencies in Mortgage Loan Reviews

On the regulatory front, efforts to integrate cryptocurrencies into the traditional financial system are accelerating. The “21st Century Mortgage Bill” proposed by Senator Cynthia Lummis requires mortgage lenders to consider cryptocurrencies in their reviews, aiming to bring US mortgage reviews into the digital age.

This bill instructs lenders to recognize assets recorded in ledgers protected by cryptographic technology as eligible for mortgage loan review. It also prohibits lenders from forcing borrowers to convert cryptocurrencies into U.S. dollars solely for the purpose of asset valuation. This reflects the reality that many young people are saving in cryptocurrencies and is positioned as a measure to address the decline in homeownership rates among younger generations.

Interestingly, this bill also formalizes a policy shift already underway at the Federal Housing Finance Agency (FHFA). FHFA Director Bill Pardee has already ordered Fannie Mae and Freddie Mac to treat cryptocurrencies as eligible assets in risk assessments for single-family mortgages. Such proactive regulatory measures signal a significant shift in cryptocurrency policy under the current administration.

Establishing the Legal Status of Stablecoins

In the stablecoin sector, the GENIUS Act has established federal regulations for payment stablecoins. This law defines stablecoins as a means of payment, prohibits the payment of interest, and limits issuers to regulated banks and other institutions. BlackRock's latest report analyzes that this legislation has established stablecoins as a means of payment that will “shape the future of finance.”

According to BlackRock's analysis, this legal framework could strengthen the international role of the US dollar by promoting cross-border transactions through a tokenized dollar payment network. On the other hand, it also points out that the prohibition of interest could inhibit the spread of stablecoins in major economies where attractive bank deposits are available.

Important points have also been raised regarding the management of stablecoin reserves. Issuers primarily hold reserves in short-term U.S. Treasury bills (T-bills) and money market funds, with major issuers like Tether and Circle currently being large buyers in the T-bill market. Even if demand for stablecoins expands in the future, funds are likely to move from similar assets, and the impact on U.S. Treasury yields is expected to be limited.

Technical Considerations  

The Proof of Work vs. Proof of Stake Debate  

When considering the future potential of cryptocurrencies from a technical perspective, the views of renowned investor Bill Miller are particularly insightful. He asserts that blockchains adopting Proof of Stake (PoS), such as Ethereum and Solana, have a “low likelihood of ultimately prevailing,” and argues that the durability of Bitcoin's Proof of Work (PoW) design is unmatched by other networks.

Miller's criticism of PoS governance stems from the fact that it allows those with significant stakes in the blockchain to wield decision-making power, which he argues is “exactly the same as the current societal structure and not a technological revolution.” In contrast, he evaluates Bitcoin's PoW as a “game-changing technology,” noting that the energy costs associated with new issuance support the network's overall integrity.

This technical debate extends beyond academic discussion, significantly influencing actual investment strategies and corporate financial strategies. Miller predicts that “in 20 or 30 years, all companies will become firms that hold Bitcoin as a financial asset,” and also forecasts that investors who include Bitcoin-related products in their portfolios will outperform those who do not.

Standard Chartered Bank's Prediction

On the other hand, Standard Chartered Bank predicts that corporations may eventually manage 10% of the total supply of Ethereum. According to the bank's report, these companies are not holding ETH for speculative purposes, but rather building their financial strategies around staking yields and integration with DeFi (decentralized finance).

While spot Ethereum ETFs under U.S. regulation prohibit staking, these companies have a structural advantage because they can stake. Many companies stake the majority of their ETH holdings to generate additional returns, resulting in their stocks often trading at prices exceeding their net asset value, effectively functioning as “yield-bearing ETFs.”

This trend extends beyond the industry, with companies in biotechnology and energy also adopting ETH financial strategies. Standard Chartered Bank positions this movement not as a mere replication of Bitcoin's corporate financial model but as a new digital asset strategy leveraging Ethereum's programmability.

Impact on the Market and Future Outlook

The Impact of Changes in Corporate Financial Strategy on the Market

Large-scale holdings of crypto assets by companies are bringing about fundamental changes in the market structure itself. Strategy Inc.'s control of 62.3% of the Bitcoin market has the potential to significantly alter the traditional concept of a decentralized crypto asset market. On the other hand, the impact of such centralization on market stability is a point of interest for the future.

Continuous purchases by corporations may have a price-supporting effect on cryptocurrencies. Especially if these corporations adopt strategies based on long-term holding, the actual circulation volume in the market may decrease, potentially functioning as a stabilizing factor for prices. However, the impact of these corporations' financial conditions or strategic changes on the overall market cannot be ignored.

Accelerated Entry of Institutional Investors

The large-scale inflow of funds into the ETF market indicates that institutional investors are beginning to enter the cryptocurrency market in earnest. In particular, the fact that the XRP ETF recorded an inflow of $50.4 million in a single day is evidence of growing interest in cryptocurrencies among institutional investors.

Such institutional investor participation is expected to promote market maturation. This includes the introduction of more sophisticated investment strategies, enhanced risk management, and stricter compliance with regulations. On the other hand, there is also the possibility that institutional investor activities could exert a greater influence on market prices.

Progress and Challenges in Regulatory Development

The development of a regulatory environment is essential for the healthy growth of the cryptocurrency market. Recognizing cryptocurrencies in mortgage loan reviews and establishing the legal status of stablecoins are important steps toward integrating cryptocurrencies into the traditional financial system.

However, regulatory development requires a careful balance. Excessive regulation could hinder technological innovation, while insufficient regulation could negatively impact investor protection and market stability. While current regulatory trends in the United States are relatively crypto-friendly, it is important to consider the possibility of regulatory policy changes due to future political shifts.

International Competition and the Status of the US Dollar

In the stablecoin sector, US regulatory policies could impact international competitiveness. The interest prohibition under the GENIUS Act could affect the dollar's status if other countries, such as Hong Kong, which is promoting business attraction, allow interest-bearing stablecoins. BlackRock has also hinted that the U.S. may respond to this competition by eventually permitting interest.

Such international competition could serve as a catalyst for the globalization and complexification of the cryptocurrency market. Differences in regulatory policies among countries could influence the flow of funds and the direction of technological development. To maintain its leadership in the cryptocurrency sector, the U.S. will need to adopt a balanced regulatory policy that promotes technological innovation while ensuring investor protection.

Implications for Investors and Risk Considerations

Evaluating New Investment Opportunities

These market trends present new opportunities for investors. The adoption of crypto asset strategies by companies provides opportunities to gain exposure to crypto assets indirectly through traditional stock investments. In particular, companies such as SharpLink, which have introduced ETH concentration indicators, can more clearly evaluate the value of their crypto asset holdings.

However, these investment opportunities also come with unique risks. Changes in corporate financial strategies, shifts in the regulatory environment, and volatility in the cryptocurrency market could significantly impact investment value. Investors must fully understand these risks before making investment decisions.

Considerations for Long-Term Investment Strategies

It remains unclear whether Mr. Miller's prediction that “all companies will hold Bitcoin” will come true, but the likelihood of continued growth in corporate holdings of cryptocurrencies is high. In such an environment, determining how to position cryptocurrency-related investments within long-term investment strategies becomes a critical challenge.

From a diversification perspective, cryptocurrency-related investments have different risk-return characteristics than traditional asset classes, so they could help diversify a portfolio. However, it is also necessary to consider factors such as high volatility and regulatory risks.

Conclusion  

The cryptocurrency market is undergoing multifaceted development, driven by changes in corporate financial strategies, the emergence of innovative financial products, and the establishment of regulatory frameworks. These trends indicate that cryptocurrencies are evolving from mere speculative assets into practical financial tools.

Large-scale cryptocurrency holdings by corporations are bringing fundamental changes to market structure. Strategy's Bitcoin strategy and SharpLink's Ethereum strategy, though differing in approach, each present new corporate value creation models centered on cryptocurrencies. The success of these companies could encourage others to adopt similar strategies.

From a technical perspective, debates over the merits of PoW and PoS continue, but in the actual market, both technologies have secured different applications and investor bases. Bitcoin's status as “digital gold” and Ethereum's status as a “programmable financial platform” each hold unique value.

In terms of regulation, the United States' promotion of cryptocurrency-friendly policies is driving market growth. The recognition of cryptocurrencies in mortgage lending and the establishment of the legal status of stablecoins are important steps toward the integration of cryptocurrencies into the traditional financial system.

Looking ahead, we expect to see an expansion of cryptocurrency holdings by companies, accelerated entry by institutional investors, and continued regulatory development. These trends will interact with each other to promote further maturation of the cryptocurrency market.

However, these developments also come with various risks. Careful investment decisions are required with a thorough understanding of technical, regulatory, and market risks. In particular, the long-term impact of large-scale cryptocurrency holdings by companies on market structure requires ongoing observation and analysis.

Ultimately, current trends in the cryptocurrency market indicate that a new foundation for the digital economy is being formed. This change should be understood not as a temporary trend, but as part of a structural change in the financial system as a whole. It is crucial for investors, companies, regulatory authorities, and all market participants to adapt to this change, leverage new opportunities, and manage risks appropriately to ensure the healthy development of the market.

Disclaimer
This article is for informational purposes only and is not intended as investment advice. Cryptocurrencies are high-risk investments, so please check the latest information at your own risk.