Space Notes | From MSTR to DFDV and SBET - Let's Talk About Crypto Reserve Companies Odyssey: This episode originated from a sudden discussion by Wang Chuan in the group a few days ago about this subject, and his attitude shifted to a recommendation. I had seen this subject before and knew that everyone was subtly researching and understanding it. Seeing Chuan suddenly change his attitude is a very rare signal for me. To minimize my regrets later, I need to clarify this matter at the very least, so I specially invited two guests who have researched it more deeply to exchange ideas. 【Space Quotes】 💡 Without Michael Saylor, there would be no crypto reserve company sector, just as there would be no Bitcoin without Satoshi Nakamoto. 💡 This is yet another instance of crypto natives underestimating the power of Wall Street capital - from BTC ETF to MSTR to SQL, every time they are slapped in the face by demand. 💡 Crypto reserve companies are the stars of the musical chairs game, but Saylor cannot sit down - if he sits, the game collapses. Investors are the audience, and we can always find a chair to cash out safely. 💡 Ethereum's consensus is being rebuilt, and light positions (low holdings) + new funds (Wall Street) represent the biggest opportunity right now. 💡 These reserve companies essentially use US stock money to lift up Crypto - staying on the coins may be a safer choice.

📌【Audio Timestamp】 03:02 Discussion Origin: Wang Chuan's attitude shift triggers attention to hot topics 04:53 Sharing Framework: Core case studies of Bitcoin/Ethereum reserve companies 08:31 Four reasons for the rise of the sector: MSTR benchmark effect, liquidity expansion, compliance narrative, lack of innovation in the crypto space 12:44 Advantages of reserve companies: solid underlying assets + short-term information arbitrage opportunities 15:12 Three driving forces: Michael J. Saylor as a spiritual leader, transformation of traditional zombie stocks, new companies entering the market 20:10 Differences in reserve assets: BTC non-yielding, SOL with the highest yield, ETH in the middle 25:15 Investment methodology: three elements of price/value relationship, market sentiment, and margin of safety 30:00 Key to valuation: need to calculate the impact of cash on NAV, premium ≠ overvaluation 33:27 Buy/sell signals: buy below 1.5x premium, consider selling at 2.5-3x 36:15 Event-driven opportunities: such as stock splits (DFDV), bell-ringing ceremonies (SPET) 38:49 Sector risks: difficulty exiting the musical chairs game, custody security issues, buyer exhaustion 42:00 Discussion on the essence of premium: market expectations of asset growth flywheel effect 47:36 Key to MSTR's success: accurately matching the structural needs of different capital markets 56:15 Rebuilding Ethereum consensus: light positions + new capital entering + strengthening stablecoin narrative 01:12:37 High premium warning: need to consider team execution capability, moderate SBET premium is more stable 01:20:03 Adding or reducing ETH: is it appropriate to reduce positions over time? 01:39:28 Questioning SBET: insufficient monopoly + high early risks, recommend focusing on holding coins 01:46:47 Reserved attitude towards SBET: short history, no scale advantage, weak founder motivation 01:48:29 Cycle perspective: negative interest rate environment favors BTC, pay attention to liquidity shift signal points.

【Key Points】 1⃣️, Kenneth Li: Twitter @0xKenn_eth Q1. Why are crypto reserve companies important, and why has this sector become popular now? Crypto reserve companies are important for three main reasons: First, they are one of the biggest narrative focuses this year, attracting the most attention, liquidity, and volatility, and providing the most value capture opportunities; Second, the number of listed Bitcoin reserve companies has reached nearly 860,000 coins, with a market cap close to $100 billion, accounting for 4% of the total Bitcoin supply, which is crucial for understanding Bitcoin's price mechanism and the future development of the market; Third, reserve companies based on ETH and Sol are emerging, benchmarking against Bitcoin reserve companies, aiming to achieve a reserve ratio of over 1%. Q2. Why has the crypto reserve company sector only started to gain attention in this cycle? There are four reasons for the heated narrative around the crypto reserve company sector: First, MSTR has broken through a critical point, being included in the Nasdaq 100 index last year, and Michael Saylor, as a spiritual leader, is highly influential; Second, liquidity is in an expansion phase, with the Federal Reserve cutting interest rates and global M2 supply increasing, leading to ample market funds; Third, the narrative of compliance and institutional bull markets has prompted institutions to enter this sector, creating a flywheel effect of mutual support among peers; Finally, innovation within the crypto space has been lacking, and after picking the low-hanging fruit, companies can only turn to the public market for narrative opportunities. Q3. What are the benefits of investing in the crypto reserve company sector? From a long-term perspective, investing in the crypto reserve company sector offers a certain level of safety, aligning with the investment principle of "long slope, thick snow," while listed companies are subject to strict regulatory and disclosure mechanisms, enhancing investment safety. Additionally, the underlying asset fundamentals of these reserve companies are solid, unlike the air coin projects in the B circle, showing a clear long-term upward trend, and there exists information asymmetry in the public market, providing investors with knowledge arbitrage opportunities. Q4. What are the main driving forces behind crypto reserve companies? The first driving force is Michael J. Saylor himself, who actively promotes the acceptance and popularization of Bitcoin and similar assets as a spiritual leader; The second driving force is desperate companies or some zombie stocks in the public market, such as Metaplanet, which have achieved significant short-term increases in stock prices and company visions by adopting Bitcoin standards; The third driving force is new companies, such as DFDV (DeFi Development Corp.), which acquire and transform into crypto reserve companies, leveraging their advantages to buy assets in the secondary market and trade at better prices in the OTC market. Q5. What is the current market cap and valuation situation of DFDV? DFDV currently has a market cap of $330 million, corresponding to about 2.8 times premium. It holds nearly 700,000 SOL and $270,000 in cash, and also has tokenized stocks (DFDVX), which can be traded on multiple chain markets like Kraken and Solana, and can be used for collateral lending on Kamino. Q6. What are the differences between these crypto reserve companies? Companies with Bitcoin as the underlying asset usually come from traditional finance or traditional industry listed companies. Since Bitcoin is not an income-generating asset, these listed companies need to issue new shares and bonds at a premium to increase this BP; In contrast, reserve companies with SOL as the underlying asset are different; SOL itself is an income-generating asset, and if the reserve company does not take other actions, it can theoretically earn about 15% to 17% annualized returns through staking, which is why the premium for reserve companies with SOL as the underlying asset is relatively high; Companies with ETH as the underlying asset are in between; while ETH is an income-generating asset, its income generation speed is not as fast as Solana. Q7. What are the main financing methods for crypto reserve companies? The main financing methods for crypto reserve companies are fourfold: conventional bond issuance, convertible bonds, options, and issuing new shares. Q8. How to invest in crypto reserve companies? The underlying framework is still value speculation: 1. Dynamic balance between price and value Dynamically calculate market cap: Transforming companies (like "zombie stocks") have frequent capital changes (e.g., DFDV once split 1 for 7), requiring manual tracking of new share issuances to avoid misjudging market cap due to data lag. Correct NAV calculation: Cash on hand must be included in net asset value (e.g., DFDV's $27 million); otherwise, the official NAV will inflate the premium (originally 3.6 times → corrected to 2.8 times). Anchor BPS growth rate: The growth rate of each cryptocurrency determines long-term premium: high growth offsets narrative decay, maintaining high premiums; low growth accelerates premium shrinkage. 2. Timing using "Mr. Market" Anchor premium range to MSTR The industry benchmark MicroStrategy (MSTR) often has a premium in the range of 1.5 to 2 times, based on which strategies can be formulated: Buy signal: premium < 1.5 times (e.g., SBET was long below 1.5 times in June-July); negative premium (e.g., BNMR, SQNS) is a golden opportunity. Sell signal: premium reaches 2.5 to 3 times. Institutional cost price provides a safety margin; the entry price for primary market institutions (e.g., DFDV's $6.5, SBET's $6.15-$6.72) is an important reference; when secondary market prices are below 1.5 times institutional costs (e.g., SBET < $10, DFDV < $15), they have an advantage against selling pressure. Event-driven opportunities: Stock splits (e.g., DFDV's stock rose 4 times after the split), exchange bell ringing (e.g., SBET rose 70% after being endorsed by Joe Lubin) can catalyze short-term price fluctuations. 3. Safety margin When the premium range is within a certain value or in our comfort zone, it is a buy signal. Q9. What potential problems might the cryptocurrency sector face? As market attention increases, secondary market opportunities may decrease. Additionally, there is the risk of a "musical chairs" game, where crypto reserve companies continuously hoard coins, leading to increased profit premiums, but when someone tries to exit (e.g., government purchases), they face significant risks due to a lack of exit mechanisms. The custody risk of individual reserve companies is a concern, as theft of coins could lead to a significant drop in stock prices. Moreover, listed companies, as major buyers in the market, could experience a free fall in stock prices if a top is formed in a bull market without new buyers following, potentially leading to a "Davis double kill" effect. Q10. How to respond after a bubble bursts? If the narrative and business logic remain sound, choose quality companies and wait to buy after the bubble bursts; if the narrative is gone, making predictions is impossible, so it’s best to hold onto Bitcoin and fiat currency. Q11. What is the understanding of premium? The premium is reflected in the example of Ethereum, where investors are willing to use one Ethereum to buy a token that may only contain 0.5 Ethereum, which is based on expectations of future appreciation potential rather than simply the net asset value per share.

2⃣️Lijia Twitter @davidhornhouse Q: How can SBET break through the financing ceiling compared to MSTR? Which institutions will invest due to its 'special channel' attributes? Core logic: Institutional capital demand drives innovation and expectation mismatch in the crypto market. The essence of financial instruments is demand mapping. MicroStrategy (MSTR)'s operations such as bond issuance, convertible bonds, and perpetual preferred shares are essentially matching the differentiated demands of institutions at different market stages: Issuing convertible bonds at low levels: meets capital demand for Bitcoin Beta + volatility; Issuing perpetual preferred shares at high levels: provides institutions with tools to reduce volatility exposure + fixed income for exit transitions, avoiding cash redemption pressure. The market continues to underestimate the power of traditional capital. Cases like BTC ETF, Circle (SQL) listing, and MSTR premiums repeatedly verify the same rule: the demand for entry from traditional finance (like BlackRock and Tom Lee's Fundstrat) is greatly underestimated; a small amount of institutional capital injected into low liquidity crypto assets can trigger huge price increases (like SQL IPO 10x). The flywheel logic of Ethereum sovereign bond companies replicates the MSTR model: issue stocks/bonds → buy ETH → form a premium → accelerate asset accumulation; currently, ETH is severely undervalued (BTC exchange rate at historical iron bottom 0.05, native circle holdings are scarce + shorts are dense); stablecoins on-chain + deflationary model + institutional entry may trigger a rebound. Valuation anchor: Sovereign Put premium held by many companies (like MSTR holding 600,000 BTC) naturally enjoys a premium: new capital entering needs to pay a liquidity premium; discounted companies may be integrated and acquired, and the premium will exist long-term, supporting the "issue stocks → buy coins" flywheel. Q: For the financial products currently offered by MSTR to different users, what does it correspond to if considering SBET? MSTR currently mainly issues stocks, and the demand side may temporarily focus on stocks. However, as market risk preferences change and demand for assets like Ethereum increases, MSTR may also expand its product line in the future, including bonds and other financial products. Q: Why did you sell off before when ETH prices fell, but now you are buying again? ETH has gone through a complete market cycle in the past few years. This drastic volatility and massive turnover, combined with its relative uncertainty in performance against BTC, have washed out a large number of original HOLDERS, and many native crypto investors no longer regard ETH as their core "crypto circle Beta asset." The discussion of the stablecoin regulatory bill "GENIUS Act" once sparked market interest, but at that time, funds mainly flowed to other targets (like SQL, which saw huge gains). As the narrative momentum of similar SQL weakens, the market is looking for new, institutionally recognized "stories." Institutions/clients on Wall Street, represented by Tom Lee, have begun to pay attention to and endorse cryptocurrencies, indicating expectations of new institutional capital inflows. Q: Will banks buy ETH to protect stablecoins, and what is your view on this? The claim that "banks will buy ETH to run validation nodes to prove the safety of their stablecoins" is logically untenable. It is akin to including unextracted oil reserves in market value assessments, and comparing it to the situation of ETH nodes is too far-fetched. Using Meta's valuation (based on cash flow capability and talent, rather than tangible assets) to compare with ETH nodes is even more "exaggerated." If large companies want to obtain ETH nodes, a more likely approach is to acquire "reserve companies" that already hold a large amount of ETH and are in a discounted state, thus taking possession of the nodes and ETH assets, rather than directly purchasing ETH on a large scale and building their own nodes.

3⃣️, Peicai Li Twitter @pcfli Currently, Ethereum's position may be closer to the logic of increasing holdings as monopolies grow. The passage of regulatory bills, the role of stablecoins, and more companies using ETH as a reserve asset have strengthened Ethereum's monopoly status. From this perspective, Ethereum's current price does not show obvious bubbles. If the cash ratio is high or the market cap allocation is low, it may be appropriate to increase holdings. Considering the current market enthusiasm and the light positions of investors, there is at least no serious bubble in the market, including assets like ETH. However, caution is still needed when considering increasing holdings, and plans for reducing holdings require further thought and adjustment. Q: What are your views on the reduction strategy? Is it a one-time large reduction or a gradual reduction over time? I personally prefer to reduce holdings gradually over time rather than making a one-time large reduction. It is indeed difficult to bottom out in a bear market, and using DCA (Dollar-Cost Averaging) in a bull market is also quite reasonable. However, the specific choice of which reduction strategy to adopt should depend on market conditions and personal investment systems. When investing in cryptocurrencies, DCA is a relatively stable method. It does not require precise predictions of short-term market fluctuations like short-term trading does, but rather reduces the risks associated with quick decision-making by buying in batches. For example, one could choose to gradually reduce holdings over 3 to 4 weeks instead of making short-term judgments. In this way, while maintaining a certain level of judgment, selling with an average cost over 1 to 3 months is a relatively good choice. —— 4⃣️, Zhen Dong @zhendong2020 These "B shares" listed companies essentially attract traditional market funds to "boost" cryptocurrencies, and their structural operations (such as US stock premiums and convertible bonds) have not created new value. For ordinary investors, directly holding core assets like BTC/ETH may be a more prudent choice, without overly chasing complex financial derivatives. How does SBET compare to MSTR in terms of risk? Insufficient holding scale: MSTR monopolized BTC spot early on (accounting for 2%-3% of the total), while SBET currently holds only several hundred thousand ETH (accounting for <1% of the total), lacking market influence; Weak risk resistance: MSTR has withstood the test of bear markets, while SBET, as a latecomer, faces multiple risks such as regulatory pressure, price volatility, and collateral liquidation, and the resilience and sustainability of its founder and business remain to be verified; Latecomer disadvantage: The market's expectations for the "second MSTR" may overdraw valuations, and the success rate of imitation paths is far lower than that of innovators. In summary, SBET needs a 3-5 year observation period to verify its monopoly potential, and at this stage, it is only suitable for very small positions for learning purposes. Q: Is it based on key evidence that SBET can break through the latecomer disadvantage to dare to heavily invest at such an early stage? It is still too early to be optimistic about SBET, with three core reasons: Insufficient time accumulation: The project has only been operating for a month and a half, without experiencing a complete market cycle for verification; Weak competitive advantage: Compared to companies in the same track like BitMine/BTBT, it has not formed significant scale barriers (Ethereum's holding volume does not have an overwhelming advantage); Mismatch between valuation and leadership traits: The premium rate has surged from 1.5 times to nearly 2 times, overdrawing short-term space; founder Joseph Lubin is more of a technical pragmatist, lacking the marketing flair of someone like Michael J. Saylor, which limits brand premium expansion. 5⃣️, Kenneth Li: Twitter @0xKenn_eth (Question) Lijia Twitter @davidhornhouse (Answer) Q: What position are we in the current cycle (four-year cycle), and what is your view on Bitcoin's price? It is currently difficult to assert whether Bitcoin is still within the original four-year cycle, as the market characteristics have changed with the entry of traditional A-share participants. However, from the perspective of macro liquidity, the negative real interest rate environment and favorable factors such as the Federal Reserve's policy inclination provide good upward momentum for Bitcoin. Regarding future trends, if there is a logical shift that leads to a large-scale capital shift, it may trigger a bubble. It is necessary to closely monitor key nodes such as the appointment of a new Federal Reserve chairman and changes in inflation data to determine whether the main logic of the market has changed.