@ Pascal Hügli
2025-03-28 08:00:15
The crypto world is full of buzzwords. One that I keep on hearing: “Bitcoin is its own asset class”.
While I have always been sympathetic to that view, I’ve always failed to understand the true meaning behind that statement.
Although I consider Bitcoin to be the prime innovation within the digital asset sector, my primary response has always been: How can bitcoin (BTC), a single asset, represent an entire asset class? Isn’t it Bitcoin and other digital assets that make up an asset class called crypto?
Well, I increasingly believe that most of crypto is just noise. Sure, it’s volatile noise that is predominately interesting for very sophisticated hedge funds, market makers or prop traders that are sophisticated enough to extract alpha – but it’s noise nonetheless and has no part to play in a long-term only portfolio of private retail investors (of which most of us are).
*Over multiple market cycles, nearly all altcoins underperform Bitcoin when measured in BTC terms. Source: Tradingview*
## Aha-Moment: Bitcoin keeps on giving
Still, how can Bitcoin, as a standalone asset, make up an entire asset class? The “aha-moment” to answer this question recently came to me in a [Less Noise More Signal interview](https://www.youtube.com/watch?v=YHRluf5uxzo) I did with [James Van Straten](https://www.linkedin.com/in/james-van-straten-8782b4112/), senior analyst at Coindesk.
Let me paraphrase him here: *“You can’t simply recreate the same ETF as BlackRock. To succeed in the Bitcoin space, new and innovative approaches are needed. This is where understanding Bitcoin not just as a single asset, but as an entire asset class, becomes essential. There are countless ways to build upon Bitcoin’s foundation—varied iterations that go beyond just holding the asset. This is precisely where the emergence of the Bitcoin-linked stock market is taking shape—and it's already underway.”*
And this is actually coming to fruition as we speak. Just in the last few days, we saw several products launch in that regard.
Obviously, MicroStrategy (now Strategy) is the pioneer of this. The company now [owns](https://www.strategy.com/purchases) 506,137 BTC, and while they’ll keep on buying more, they have also inspired many other companies to follow suit.
In fact, there are now already over 70 companies that have adopted Strategy’s Bitcoin playbook. One of the latest companies to buy Bitcoin for their corporate treasury is Rumble. The YouTube competitor just [announced](https://www.coindesk.com/markets/2025/03/12/video-sharing-platform-rumble-buys-188-btc-for-usd17-1m) their first Bitcoin purchase for $17 million.
Also, the gaming zombie company GameStop just announced to raise money to buy BTC for their corporate treasury.
*Gamestop to make BTC their hurdle rate. Source: X*
## ETF on Bitcoin companies
Given this proliferation of Bitcoin Treasury companies, it was only a matter of time before a financial product tracking these would emerge.
The popular crypto index fund provider Bitwise Investments has just launched this very product called the [Bitwise Bitcoin Standard Corporations ETF](https://ownbetf.com/) (OWNB).
The ETF tracks Bitcoin Treasury companies with over 1,000 BTC on their balance sheet. These companies invest in Bitcoin as a strategic reserve asset to protect the $5 trillion in low-yield cash that companies in the US commonly sit on.
*These are the top 10 holdings of OWNB. Source: Ownbetf*
## ETF on Bitcoin companies’ convertible bonds
Another instrument that fits seamlessly into the range of Bitcoin-linked stock market products is the [REX Bitcoin Corporate Treasury Convertible Bond ETF](https://www.rexshares.com/rex-launches-bitcoin-corporate-treasury-convertible-bond-etf/) (BMAX). The ETF provides exposure to the many different convertible bonds issued by companies that are actively moving onto a Bitcoin standard.
Convertible bonds are a valuable financing tool for companies looking to raise capital for Bitcoin purchases. Their strong demand is driven by the unique combination of equity-like upside and debt-like downside protection they offer.
For example, MicroStrategy's convertible bonds, in particular, have shown exceptional performance. For instance, MicroStrategy's 2031 bonds has shown a price rise of 101% over a one-year period, vastly outperforming MicroStrategy share (at 53%), Bitcoin (at 25%) and the ICE BofA U.S. Convertible Index (at 10%). The latter is the benchmark index for convertible bond funds, tracking the performance of U.S. dollar-denominated convertible securities in the U.S. market.
*The chart shows a comparison of ICE BofA U.S. Convertible Index, the Bloomberg Bitcoin index (BTC price), MicroStrategy share (MSTR), and MicroStrategy bond (0.875%, March 15 203). The convertible bond has been outperforming massively. Source: Bloomberg*
While the BMAX ETF faces challenges such as double taxation, which significantly reduces investor returns (explained in more detail here), it is likely that future products will emerge that address and improve upon these issues.
## Bitcoin yield products
The demand for a yield on Bitcoin has increased tremendously. Consequently, respective products have emerged.
Bitcoin yield products aim to generate alpha by capitalizing on volatility, market inefficiencies, and fragmentation within cryptocurrency markets. The objective is to achieve uncorrelated returns denominated in Bitcoin (BTC), with attractive risk-adjusted performance. Returns are derived exclusively from asset selection and trading strategies, eliminating reliance on directional market moves.
### Key strategies employed by these funds include:
- *Statistical Arbitrage:* Exploits short-term pricing discrepancies between closely related financial instruments—for instance, between Bitcoin and traditional assets, or Bitcoin and other digital assets. Traders utilize statistical models and historical price relationships to identify temporary inefficiencies.
- *Futures Basis Arbitrage:* Captures profits from differences between the spot price of Bitcoin and its futures contracts. Traders simultaneously buy or sell Bitcoin on spot markets and enter opposite positions in futures markets, benefiting as the prices converge.
- *Funding Arbitrage:* Generates returns by taking advantage of variations in Bitcoin funding rates across different markets or exchanges. Funding rates are periodic payments exchanged between long and short positions in perpetual futures contracts, allowing traders to profit from discrepancies without significant directional exposure.
- *Volatility/Option Arbitrage:* Seeks profits from differences between implied volatility (reflected in Bitcoin options prices) and expected realized volatility. Traders identify mispriced volatility in options related to Bitcoin or Bitcoin-linked equities, such as MSTR, and position accordingly to benefit from volatility normalization.
- *Market Making:* Involves continuously providing liquidity by simultaneously quoting bid (buy) and ask (sell) prices for Bitcoin. Market makers profit primarily through capturing the spread between these prices, thereby enhancing market efficiency and earning consistent returns.
- *Liquidity Provision in DeFi Markets:* Consists of depositing Bitcoin (usually as Wrapped BTC) into decentralized finance (DeFi) liquidity pools such as those on Uniswap, Curve, or Balancer. Liquidity providers earn fees paid by traders who execute swaps within these decentralized exchanges, creating steady yield opportunities.
Notable products currently available in this segment include the Syz Capital BTC Alpha Fund offered by Syz Capital and the Forteus Crypto Alpha Fund by Forteus.
## BTC-denominated share class
A Bitcoin-denominated share class refers to a specialized investment fund category in which share values, subscriptions (fund deposits), redemptions (fund withdrawals), and performance metrics are expressed entirely in Bitcoin (BTC), rather than in traditional fiat currencies such as USD or EUR.
Increasingly, both individual investors and institutions are adopting Bitcoin as their preferred benchmark—or "Bitcoin hurdle rate"—meaning that investment performance is evaluated directly against Bitcoin’s own price movements.
These Bitcoin-denominated share classes are designed specifically for investors seeking to preserve and grow their wealth in Bitcoin terms, rather than conventional fiat currencies. As a result, investors reduce their exposure to fiat-related risks. Furthermore, if Bitcoin outperforms fiat currencies, investors holding BTC-denominated shares will experience enhanced returns relative to traditional fiat-denominated investment classes.
X: https://x.com/pahueg
Podcast: https://www.youtube.com/@lessnoisemoresignalpodcast
Book: https://academy.saifedean.com/product/the-bitcoin-enlightenment-hardcover/