PIPE, ATM, convertible bonds? Understand the various "tricks" of crypto reserve companies in one article.

More and more publicly listed companies are beginning to "reserve cryptocurrencies."

They are no longer just buying BTC or ETH, but are following in the footsteps of MicroStrategy, building a complete set of replicable financial models: through traditional financial tools such as PIPE, SPAC, ATM, and Convertible Bonds, they are raising large amounts of capital, accumulating assets, and creating momentum. This is further enhanced by the new narrative of "on-chain treasury," incorporating cryptocurrencies like Bitcoin, Ethereum, and SOL into the company's core balance sheet.

This is not only a change in asset allocation strategy but also a new type of "financial engineering": a market experiment driven by capital, narrative, and regulatory gaps. Institutions such as UTXO Management, Sora Ventures, Consensys, Galaxy, and Pantera have successively entered the scene, pushing several marginal listed companies to complete their "transformation" into "crypto reserve stocks" in the U.S. or Hong Kong stock markets.

However, this seemingly innovative capital feast is also raising alarms among traditional finance professionals. On July 18, Wall Street's famous short-seller Jim Chanos warned that today's "Bitcoin treasury craze" is repeating the SPAC bubble of 2021—companies are buying coins by issuing convertible bonds and preferred stocks without actual business support. "Every day there are hundreds of announcements, just like the madness back then," he said.

This article outlines four key tools and representative cases behind this trend, attempting to answer a question: how does a company evolve from "buying coins" to "making moves" when traditional financial tools meet crypto assets? And how should retail investors identify risk signals in this capital game?

How Financing Tools Build "Coin-Buying Companies"?

PIPE: Institutions Enter at a Discount, Retail Investors Buy at a High

PIPE (Private Investment in Public Equity) refers to a public company issuing stocks or convertible bonds to specific institutional investors at a discounted price to achieve rapid financing. Compared to traditional public offerings, PIPE does not require cumbersome review processes and can complete capital injection in a short time, making it a "strategic lifeline" tool during tight financing windows or uncertain market periods.

In the trend of crypto treasuries, PIPE has been given another function: to create a signal of "institutional entry," driving stock prices to rise rapidly and providing "market validation" for project narratives. Many originally unrelated listed companies have introduced funds through PIPE to purchase large amounts of BTC, ETH, or SOL, quickly reshaping their identity into "strategic reserve companies." For example, SharpLink Gaming (SBET) saw its stock price surge more than tenfold shortly after announcing a $425 million PIPE financing to establish an ETH treasury.

However, the impact of PIPE goes far beyond superficial benefits. In terms of structural design, PIPE investors typically enjoy better entry prices, lock-up arrangements, and liquidity channels. Once a company submits an S-3 registration statement, the related shares can be listed for trading, allowing institutional investors to choose to cash out. Although S-3 is essentially just a technical operation and does not directly imply that a sell-off has occurred, in a highly emotional market, this action is often misinterpreted as "institutions starting to cash out," triggering market panic.

SharpLink's experience is a typical case: on June 12, 2025, the company submitted an S-3 registration statement allowing PIPE shares to be listed for resale. Despite Chairman and Ethereum co-founder Joseph Lubin publicly clarifying that "this is a standard PIPE follow-up process in tradfi" and stating that neither he nor Consensys had sold any shares, market sentiment was already difficult to recover. The stock price fell a cumulative 54.4% over the next five trading days, becoming a textbook example of the structural risks of the PIPE model. Although the stock price later rebounded, the dramatic volatility of "soaring and then plummeting" reflects the structural fractures in the PIPE process.

Additionally, BitMine Immersion Technologies (BMNR) also experienced a "surge and crash" scenario after announcing its PIPE structure. After announcing a $2 billion PIPE financing for Ethereum treasury construction, the stock price soared and then collapsed, dropping nearly 39% in a single day, making it one of the four high-risk "crypto treasury stocks" mentioned in the Unchained report.

The fundamental risk of PIPE lies in information asymmetry and liquidity mismatch: institutional investors enter at a discount and enjoy reserved exit mechanisms; ordinary investors often only enter during positive narratives like "successful financing" or "coin-based treasury," passively taking on risks before the lock-up pressure arrives. In traditional financial markets, this "pump and dump" structure has long been controversial, and in the less regulated, more speculative crypto space, this structural imbalance is further amplified, becoming another risk driven by capital narratives.

SPAC: Writing Valuation in Press Releases, Not Financial Reports

SPAC (Special Purpose Acquisition Company) was originally a tool used in traditional markets for reverse mergers: a group of sponsors first establishes a shell company, raises funds through an IPO, and then seeks to acquire a private company within a specified time frame, allowing the latter to bypass the conventional IPO process and achieve "quick listing."

In the crypto market, SPAC has been given a new purpose: to provide a financial vehicle for "strategic reserve" companies, allowing their Bitcoin, Ethereum, and other digital asset treasuries to be securitized and incorporated into the exchange system, thus facilitating both financing and liquidity.

These companies often lack a clear business path, product model, or revenue source. Their core strategy is to first finance through PIPE to acquire crypto assets, build a "coin-based" balance sheet, and then merge via SPAC to enter the public market, packaging an investment narrative of "holding coins equals growth" for investors.

Typical representatives include Twenty One Capital, ProCap, and ReserveOne, which mostly revolve around a simple model: raising funds to purchase Bitcoin and putting Bitcoin into a stock ticker. For example, Twenty One Capital holds over 30,000 Bitcoins, merges with a SPAC supported by Cantor Fitzgerald, and raises $585 million through PIPE and convertible bonds, with part of the funds used for on-chain yield strategies and Bitcoin financial product development. ProCap, supported by Pompliano, develops lending and staking businesses around its Bitcoin treasury. ReserveOne is more diversified, holding BTC, ETH, SOL, and participating in institutional-level staking and over-the-counter lending.

Moreover, these companies are often not satisfied with merely "holding coins for appreciation." They frequently issue convertible bonds and increase new stock issuance to raise more funds to purchase more Bitcoin, forming a "structural leverage model" similar to MicroStrategy. As long as the coin price rises, the company's valuation can expand excessively.

The biggest advantage of the SPAC model is time and control. Compared to the 12-18 months required for a traditional IPO, a SPAC merger can theoretically be completed in 4-6 months, and the narrative space is more flexible. Founders can tell future stories without disclosing existing revenues, lead valuation negotiations, and retain more equity. Although in reality, such crypto projects often face longer regulatory review periods (e.g., Circle ultimately abandoned SPAC in favor of an IPO), the SPAC route remains popular, especially for those "coin-based companies" that have not yet established revenue capabilities, as it provides a shortcut to bypassing product, user, and financial fundamentals.

More importantly, the "public company" identity brought by SPAC has a natural legitimacy in investor perception. Stock tickers can be included in ETFs, traded by hedge funds, and listed on Robinhood. Even if the underlying assets are digital currencies, the outer packaging conforms to the language system of traditional finance.

At the same time, such structures often carry strong "signal value"—once a large PIPE financing is announced or a partnership with a well-known financial institution is established, it can quickly activate retail investor sentiment. Twenty One Capital attracted market attention precisely because it had backing from Tether, Cantor, and SoftBank, even though the company's actual operations had not yet begun.

However, SPAC brings not only convenience and aura; its structural risks are also significant.

Business Stagnation and Narrative Overdraft: Many companies merged via SPAC lack stable revenue, and their valuations heavily depend on whether the "Bitcoin strategy" can continue to attract attention. Once market sentiment reverses or regulations tighten, stock prices will quickly fall.

Inequitable Institutional Priority Structure: Sponsors and PIPE investors typically enjoy enhanced voting rights, early lock-up releases, and pricing advantages, while ordinary investors are at a dual disadvantage in terms of information and rights, leading to severe equity dilution.

Compliance Operations and Information Disclosure Challenges: After completing a merger, the company must assume the obligations of a public company, such as auditing, compliance, and risk disclosure, especially in a context where accounting rules for digital assets are not yet well established, leading to potential financial report confusion and audit risks.

Valuation Bubble and Redemption Mechanism Pressure: SPACs often experience inflated valuations in the early stages due to narrative expectations, and if retail investors redeem en masse during sentiment reversals, it can lead to cash flow strain, expected financing failures, and even trigger secondary bankruptcy risks.

The more fundamental issue is that SPAC is a financial structure, not value creation. It is essentially a "narrative container": packaging the future vision of Bitcoin, signals of institutional backing, and plans for capital leverage into a tradable stock ticker. When Bitcoin rises, it appears sexier than an ETF; but when the market reverses, its complex structure and fragile governance will be exposed more thoroughly.

ATM: Printing Money Anytime, Issuing More as Prices Fall

ATM (At-the-Market Offering) is originally a flexible financing tool that allows publicly listed companies to sell shares to the open market in phases based on market prices, raising funds in real-time. In traditional capital markets, it is often used to hedge operational risks or supplement cash flow. In the crypto market, ATM has been given another layer of functionality: serving as a "self-financing channel" for strategic reserve companies to continuously accumulate Bitcoin and maintain liquidity.

The typical approach is: the company first constructs a narrative around a Bitcoin treasury, then initiates an ATM plan, continuously selling shares to the market in exchange for cash to purchase more Bitcoin without needing to specify pricing or time windows. Unlike PIPE, it does not require specific investors to participate, nor does it need to disclose complex processes like an IPO, making it more suitable for asset allocation companies that are flexible in pace and narrative-driven.

For example, Canadian listed company LQWD Technologies announced the launch of an ATM plan in July 2025, allowing it to sell up to CAD 10 million in common shares to the market on an irregular basis. In the official statement, the ATM plan "enhances the company's Bitcoin reserve capabilities and supports its global Lightning Network infrastructure expansion," clearly conveying its growth path centered around Bitcoin as a core asset. Similarly, Bitcoin mining company BitFuFu signed ATM agreements with several underwriters in June, planning to raise up to $150 million through this mechanism, and has formally filed with the SEC. Its official documents state that this will help the company finance according to market dynamics without needing to set financing windows or trigger conditions in advance.

However, the flexibility of ATM also means higher uncertainty. Although companies must submit a registration statement to the SEC (usually an S-3 form) detailing the issuance scale and plan, and are subject to dual regulation by the SEC and FINRA, the issuance can occur at any point without prior disclosure of specific prices and times. This "no-warning" issuance mechanism is particularly sensitive during stock price declines, easily triggering a "dilution cycle" where the more the stock price falls, the more shares are issued, leading to weakened market confidence and harmed shareholder equity. Due to high information asymmetry, retail investors are more likely to passively bear risks in this process.

Moreover, ATM is not suitable for all companies. If a company does not qualify as a "Well-Known Seasoned Issuer" (WKSI), it must comply with the "one-third rule," meaning that fundraising through ATM within 12 months cannot exceed one-third of its public float market value. All transactions during the issuance process must be completed through regulated brokers, and the company must disclose fundraising progress and use of funds in financial reports or through 8-K filings.

Overall, ATM is a means of concentrating financing power: companies do not need to rely on banks or external fundraising; they can simply "press a button" to raise cash to increase their Bitcoin and Ethereum holdings. For founding teams, this is an attractive path; but for investors, it may mean being passively diluted without any warning. Therefore, behind the "flexibility" lies a long-term test of governance capability, transparency, and market trust.

Convertible Bonds: Financing + Arbitrage "Two Hands Grab"

Convertible Bonds are a financing tool that combines debt and equity attributes, allowing investors to enjoy bond interest while retaining the right to convert the bonds into company stock, providing a dual revenue path of "fixed income protection" and "equity potential." In the crypto industry, this tool is widely used for strategic financing, especially favored by companies looking to raise funds to "increase Bitcoin holdings" without immediately diluting equity.

Its appeal lies in: for companies, convertible bonds can complete large-scale financing at a lower coupon rate (even zero); for institutional investors, it offers an arbitrage opportunity of "downside protection and upside potential for stock price appreciation." Many mining companies, stablecoin platforms, and on-chain infrastructure projects have introduced strategic funds through convertible bonds. However, this also lays the groundwork for dilution risk: once the stock price reaches the conversion conditions, the bonds will quickly convert into shares, releasing large-scale selling pressure and causing sudden market shocks.

MicroStrategy is a typical case of using convertible bonds for "strategic reserve accumulation." Since 2020, the company has issued two convertible bonds, raising a total of $1.7 billion, all used to purchase Bitcoin. The first bond issued in December 2020 was a 5-year bond with a coupon of only 0.75% and a conversion price of $398 (a 37% premium); the second bond in February 2021 even had a 0% interest rate, a 6-year term, and a conversion price of $1,432 (a 50% premium), yet still received $1.05 billion in oversubscription. MicroStrategy leveraged a holding of over 90,000 Bitcoins at an extremely low cost of capital, achieving a super accumulation of Bitcoin with almost zero leverage costs, and its CEO Michael Saylor has thus been dubbed "the biggest gambler in the crypto world."

However, this model is not without cost. MicroStrategy's financial leverage has far exceeded traditional corporate standards, and if Bitcoin prices fall significantly, the company's net assets could turn negative. As indicated in an IDEG report, when BTC falls below $17,500, MicroStrategy will face a situation of negative net worth on paper. Additionally, since its convertible bonds are in private placement form, some forced redemption and conversion terms have not been disclosed, further exacerbating market uncertainty regarding future dilution timing.

In summary, convertible bonds are a double-edged sword: they provide companies with a high degree of freedom between "non-dilutive financing" and "strategic accumulation," but they can also trigger concentrated selling pressure at any moment. Especially under conditions of information asymmetry, ordinary investors often find it difficult to perceive the specific triggering points of conversion terms, becoming the ultimate bearers of dilution.

Conclusion: Narrative Above, Structure is King

On July 18, Wall Street's famous short-seller Jim Chanos compared this wave of "crypto treasury craze" to the SPAC frenzy of 2021—during which $90 billion was raised in three months, only to collectively collapse and bleed profusely. He pointed out that the difference in this round is that companies are purchasing Bitcoin through issuing convertible bonds and preferred stocks, but there is no actual business support. "We see several hundred million in announcements almost every day," he said, "this is just like the madness of SPAC back then."

At the same time, a report from Unchained further pointed out that these "crypto treasury companies" face serious structural risks. The report listed representative projects such as SATO, Metaplanet, and Core Scientific, indicating that their real asset net values (mNAV) are far below market valuations, compounded by unclear disclosures, insufficient treasury quality, and complex structures. Once market sentiment reverses, they are likely to shift from "crypto reserves" to "financial bombs."

For ordinary investors, "companies buying coins" is far more complex than it appears on the surface. What you see are announcements, price limits, narratives, and numbers, but what truly drives price fluctuations is often not the coin price itself, but the design of the capital structure.

PIPE determines who can enter at a discount and who is responsible for taking over; SPAC determines whether a company can bypass financial quality checks to tell its story directly; ATM determines whether the company is still "selling while falling" when stock prices decline; convertible bonds determine when someone suddenly converts debt into equity and triggers concentrated selling.

In these structures, retail investors are often placed in the "last baton": without priority information or liquidity guarantees. What seems like an investment in "believing in crypto" actually carries multiple risks of leverage, liquidity, and governance structure.

Therefore, when financial engineering enters the narrative battlefield, investing in crypto companies is no longer just a matter of being bullish on BTC or ETH. The real risk lies not in whether the company has bought coins, but in whether you can understand how it is "making moves."

How market capitalization can inflate with coin prices, and how it can release selling pressure through structure—this design process determines whether you are participating in growth or igniting the fuse for the next round of collapse.

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