Title: A Special RWA Model: Coin-Stock Linked RWA of US and HK Stocks

Author: Ye Kai (WeChat/Twitter: YekaiMeta)

The concept of RWA (Real World Assets) has been quite popular recently, but the RWA products of licensed exchanges have not expanded significantly, limited to the RWA cases of US Treasury collateralized income-generating assets in Defi. Recently, after BlackRock's deep layout in Bitcoin spot ETFs, RWA has gained renewed attention. However, since RWA is more oriented towards the B2B institutional market, how to design it for the C2C retail market? This question still restricts the expansion of RWA.

Given that RWA is a product that integrates virtual assets and traditional finance, besides the tokenization of physical assets, there is actually a special RWA model, which is the coin (virtual assets) and stock (traditional financial stocks) linked RWA model. This model can be directly aimed at retail investors and already has mature cases with significant effects. Here, we will analyze it to see if it might develop into a type of RWA product in the future.

The coin-stock linked RWA model simply refers to the linkage between traditional financial stocks and virtual assets. The stocks of listed companies are linked to the investment allocation of virtual assets and the layout of Web3, driving the value of listed company stocks in the physical world to double as the price or value of virtual assets, primarily Bitcoin, continues to rise. This kind of linked growth is often exponential or at a premium.

Case Analysis of MicroStrategy in US Stocks

First, let's take a look at Bitcoin stocks in the US, with MicroStrategy being the most typical Bitcoin concept stock. MicroStrategy (MSTR) heavily invests in Bitcoin and is considered a Bitcoin concept stock in the US market. Since entering the virtual asset space in 2020, MSTR has continuously increased its holdings, not only during the peak of the 2021 bull market but also at the low point of the 2022 bear market. Its strategy for holding Bitcoin mainly includes: lending out held Bitcoin for profit, issuing long-term bonds to purchase Bitcoin, issuing additional shares in the secondary market to finance the acquisition of BTC with shareholders' money, and using cash flow from its main business to increase BTC holdings. The effect of the coin-stock linkage is that MicroStrategy's (MSTR) stock price has increased fivefold since January 23, 2024, in line with the rising Bitcoin price.

We have conducted a detailed analysis of MicroStrategy's announcements and operations related to Bitcoin over the past two years to understand its coin-stock linkage strategy and methods.

1. Strategic Holdings

MicroStrategy views Bitcoin as one of its main financial strategies, believing it to be a long-term store of value that helps hedge against inflation risks. Therefore, since 2020, MSTR has clearly outlined its strategy for purchasing and holding Bitcoin through announcements.

2. Continuous Accumulation

Over the past two years, MSTR has repeatedly announced Bitcoin purchases through announcements, regardless of whether the market is in an uptrend or downtrend, and whether at bull market peaks or bear market lows. This indicates that the company has adopted a long-term and continuous accumulation strategy rather than short-term speculation.

3. Multi-Channel Financing

MSTR has employed various financing methods to purchase Bitcoin:

• Issuing convertible bonds: Raising funds through the issuance of convertible bonds for Bitcoin purchases.

• Issuing senior unsecured bonds: Further raising funds through the issuance of senior unsecured bonds.

• Secondary market stock issuance: Financing through issuing additional shares in the secondary market.

• Using cash flow: Utilizing the company's cash flow for Bitcoin purchases.

• Lending held Bitcoin for profit: Using its held Bitcoin for lending to gain additional income.

4. Flexible Response to Market Volatility

MSTR has purchased Bitcoin during different market cycles, demonstrating its confidence in Bitcoin's long-term value while also reflecting the company's flexibility in responding to market volatility.

5. Transparent Announcements

MSTR has announced the time, price, quantity, and total holdings of each Bitcoin purchase, maintaining a high level of transparency, which helps investors understand the company's Bitcoin strategy and holdings.

6. Correlation Between Stock Price and Bitcoin Price

Due to MicroStrategy's substantial Bitcoin holdings, the company's stock price is closely related to Bitcoin's price. When Bitcoin's price rises, the company's stock price typically rises as well, and vice versa.

Conclusion

MicroStrategy's operational logic is primarily reflected in its belief in Bitcoin's long-term value. The company closely ties its financial strategy to Bitcoin's price through continuous accumulation, multi-channel financing, and highly transparent announcement strategies, while also increasing the volatility of its stock price. This series of operations not only brings financial benefits but also makes it an important channel for investors to participate in the digital currency market.

MicroStrategy's stock price is closely related to Bitcoin's price mainly because the company holds a large amount of Bitcoin and continues to accumulate. When Bitcoin's price rises, the value of the Bitcoin held by the company increases, reflecting in the company's market value, thus driving the stock price up. Conversely, when Bitcoin's price falls, the value of the Bitcoin held by the company decreases, affecting the stock price.

Additionally, the company's financing methods through bond issuance and stock issuance to purchase Bitcoin have also increased market expectations for the correlation between the company's stock price and Bitcoin's price. Investors believe that as the number of Bitcoins held by the company increases, its stock price will be more influenced by Bitcoin's price fluctuations.

Overall, MicroStrategy has tightly linked its stock price with Bitcoin's price through a series of operational methods, making the company a pathway for investors to participate in the Bitcoin market while also increasing the volatility of its stock price.

Case Analysis of Boyaa Interactive in HK Stocks

Similarly, based on the publicly available announcements from Boyaa Interactive (0434.HK), we analyzed the company's operational logic and methods:

1. Announcement of Cryptocurrency Purchases: On August 10, 2023, Boyaa Interactive released a voluntary announcement stating its plan to invest $5 million in cryptocurrencies over the next year, mainly including Bitcoin and Ethereum. This announcement indicates the company's positive attitude towards the cryptocurrency market and has attracted market attention.

2. Expansion of Investment Scale: By November 13, 2023, the company proposed to increase the total amount for cryptocurrency purchases to $100 million, which was approved by shareholders at a special meeting on December 22, 2023. This move demonstrates the company's further determination in cryptocurrency investment.

3. Implementation and Announcement of Purchases: In an announcement on March 8, 2024, the company disclosed specific purchase details, including the quantity and average price of Bitcoin and Ethereum purchased, as well as the purchase of Tether (Note: the total purchase price at that time was over $90 million, with Bitcoin purchased at $41,790). This transparent information disclosure helps enhance market confidence in the company's actions.

4. Stock Price Linkage Strategy: By publicly and transparently disclosing the purchase status and investment plans for cryptocurrencies, Boyaa Interactive leverages the volatility and popularity of the cryptocurrency market to attract investor attention, thereby driving up its stock price. The company integrates cryptocurrency investment as an important part of its asset allocation, combining it with its Web3 business layout, forming a linkage between Bitcoin's price and the stock price.

Based on the above analysis, Boyaa Interactive's operational plan for the linkage between Bitcoin's price and stock price can be summarized in the following steps:

1. Formulate Cryptocurrency Investment Plan: Clearly define investment goals, scale, and main investment targets (such as Bitcoin, Ethereum, etc.).

2. Publicly and Transparently Disclose Investment Plans: Announce investment plans to the market and investors to increase market attention.

3. Step-by-Step Implementation of Purchases: Implement cryptocurrency purchases step by step based on market conditions and company funding, adjusting investment strategies as needed.

4. Regularly Update Investment Status: Periodically disclose specific purchase status and holdings to enhance transparency.

5. Integrate with Business Layout: Combine cryptocurrency investment with the company's Web3 business layout to create synergies that promote stock price growth.

Through such an operational plan, Boyaa Interactive has utilized the popularity and volatility of the cryptocurrency market to attract market attention, achieving multiple growth in stock price (from 250 million to 1.7 billion HKD). At the same time, it has also provided funding support and strategic synergy for the company's layout in the Web3 field.

In conclusion, coin-stock linkage is a special RWA model that successfully integrates financial assets from the virtual world with those from the physical world, and it can be directly aimed at retail investors, making it easier for physical world institutions and retail investors to understand and accept. It can also achieve exponential or even tenfold effects. It is believed that more and more Bitcoin stock RWA operational plans will emerge, which will also promote the emergence of more RWA models and products.