The announcement of the 21-person capital’s formation last month was filled with mixed reactions. Some viewed it as another major step towards institutional adoption, while others felt tired of Bitcoin being a potential victim of “wall streetization.”
To better understand the reasons for optimism and anxiety surrounding the launch of Twenty One Capital, Beincrypto consulted Matt Mena, a researcher at 21Shares, and Mati Greenspan, CEO of Quantum Economics.
Public Bitcoin giants appear in a mixed reaction
The announcement of Twenty One Capital surprised both the Tradfi space and the crypto space. Supported by industry giants and well-known crypto enthusiasts, the ambitious Bitcoin native quickly became the focus of intense debate and speculation.
At the forefront of this new venture is Jack Mullers, the famous Bitcoin supporter and CEO of Strike. He reportedly will lead Twenty One as CEO.
The company also boasts significant financial support from USDT publishers Tether and SoftBank Group, Global Investment Powerhouse.
Twenty One Capital is composed as a published entity through a business combination with Cantor Equity Partners. The company is expected to be released at the Bitcoin Treasury, which is more than 42,000 BTC.
The missions include maximizing ownership of Bitcoin per share, advocating for adoption of Bitcoin, creating related content and investigating future Bitcoin native financial products.
The news sparked a subtle response, and excited that Bitcoin will become more mainstream, along with concerns about how it will affect assets designed to challenge traditional finance.
Institutionalization of Bitcoin: Opens the door to wider investments
For loyal supporters of Bitcoin’s potential from the outset, the formation of 21 capital solidified their belief that Bitcoin has finally achieved a new level of mainstream verification.
Key players like SoftBank and Tether backing show that they are increasingly confident in Bitcoin as a legitimate asset class. Others may also see the creation of public companies dedicated solely to Bitcoin, or further strengthening the market position.
“The launch of 21 Capital does not change Bitcoin’s core architecture or spirit, but it highlights the hundreds of millions of dollars combined by institutional investors such as Canter Fitzgerald and Softbank increasingly recognize the value of Bitcoin as a neutral, non-sovereign asset in today’s Shiftyfe’s Landscape.
By institutionalizing Bitcoin, Twenty One Capital will also open its assets to a wider class of investors.
Increased liquidity and access
Cryptographers have consistently welcomed the steps to bring digital assets closer to mainstream investors.
Last year’s approval of Bitcoin and Ethereum Exchange Trade Funds (ETFs) showed a significant initial move in this direction. This development allowed traditional traders to be exposed to portfolios without directly holding these alternative assets.
The launch of Twenty One Capital will likely have an equal impact. Establishing a large Bitcoin Treasury within publicly traded vehicles will increase liquidity and provide a more accessible route to Bitcoin exposure for traditional investors.
On the other hand, unlike companies that only allocate a portion of their assets to Bitcoin, Twenty One Capital’s overall goal revolves around Bitcoin. This commitment could pave the way for development that contributes to the growth and health of the Bitcoin ecosystem.
“Investment avenues such as 21 capital, strategies (previously micro-strategic), ETF rappers will undoubtedly further expand the original vision of Bitcoin by democratizing access to finance. They will help make Bitcoin’s exposure available to wider investors, from institutions to everyday savers.
Despite the merits of these discussions, the key support of Tether and Softbank poses several potential risks.
Bitcoin’s decentralization characteristics are unique
When asked about the potential negative impact of Twenty One Capital on the Bitcoin network, MENA critically distinguished between two important aspects.
He revealed that Twenty One Capital will be a service built on top of the Bitcoin network. Therefore, centralization within operations does not change the decentralized nature underlying the Bitcoin protocol. Individuals are free to interact with peer-to-peer, peer-to-peer and directly with Bitcoin.
“However, it is important not to merge the participation of the institution with control. Bitcoin remains decentralized and protected by a globally decentralized network of miners and nodes. Entities like 21 Capital do not change protocols or concentrate assets.
However, despite this reality, a single entity with over 42,000 BTC corporate finance ministry will inevitably inherit a major impact on the market due to the self-limiting supply of Bitcoin.
Feedback loop: Fund your Bitcoin purchases as well
As 21 capital is primarily based on Bitcoin, its stock price will be closely related to its value and its ability to increase its shares held per share.
If Bitcoin prices rise and the company is considered to increase BPS effectively, the stock price could be highly valued. This higher rating in the open market gives Twenty One Capital several advantages.
As stock prices rise, 21 capital makes it easier and attractive to raise additional capital through stock offerings, debt financing, or convertible memos.
With newly acquired capital, as stated in the announcement, Twenty One Capital’s core strategy is to “strategically allocate capital to increase Bitcoin per Bitcoin.” This intent translates directly into using the raised funds to buy more Bitcoin.
As 21 capital accumulates Bitcoin, it could put upward pressure on prices, increasing the value of existing holdings. This appreciation could further enhance the company’s stock price and the appeal of investors.
As a result, this will make future capital more effective and create a positive feedback loop for the company.
This cycle could lead to one publicly-publicized company that manages a significant portion of the limited supply of Bitcoin. This prospect has caused anxiety within parts of the community.
Is Bitcoin’s decentralized vision at odds with corporate accumulation?
The central tenet of Nakamoto’s Bitcoin vision was the distribution of broad ownership to avoid centralized control. This concept is at odds with companies like Twenty One capital, which accumulates a significant portion of the supply.
This substantial ownership could harm small participants and introduce market instability that deviates from the purposes of decentralized digital currency. That level of institutionalization has heightened the fear of turning Bitcoin into another Wall Street asset.
This development could reduce individual financial autonomy ideals.
Mati Greenspan, CEO of Quantum Economics, has reiterated the core Bitcoin principles in light of this threat. He emphasized the original creation of Bitcoin as a fundamental means of removing intermediaries from the financial process.
“It’s honestly baffling to me that people like Jack Mullers and Michael Saylor can really explain why Bitcoin is the best asset ever created. Then they try to use the same explanation to sell stocks. Personally, I don’t stick to personal assets.
For now, the outcome of this situation is very subtle and unpredictable.
Navigate the gap
Ultimately, the impact of Twenty One Capital will likely be a complicated balancing act. That effort could bring more mainstream legitimacy and investment to Bitcoin, potentially accelerating its adoption as a global digital asset.
However, its important institutional support also risks prioritizing shareholder interests over Bitcoin’s original diversified vision.
The key is to observe how 21 capital behaves, the types of products it develops, and how its activities support or potentially compromise the core principles of Bitcoin of its decentralisation and peer-to-peer nature.
The role of the Bitcoin community and regulators is important in shaping this trajectory.
Disclaimer
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