(Bloomberg) — When Michael Saylor transformed his long-fading software firm into a Bitcoin juggernaut in 2020, he pulled off one of the most successful corporate pivots in recent memory by weaponizing the sheer power of capital markets.

Now, Cantor Fitzgerald — backed by institutional muscle — is aiming to replicate Saylor’s success with even bigger ambitions.

Along with stablecoin heavyweight Tether Holdings SA and SoftBank Group, the new digital-asset venture, Twenty One Capital, is positioning itself as a next-generation Bitcoin “pure play.” Like the former MicroStrategy, now renamed Strategy, Twenty One will raise capital to amass the digital token and invest in related products and infrastructure. Yet unlike Strategy, it’s also launching with deep-pocketed partners and a bigger Bitcoin holding from the get-go.

Given the heft of its backers, the new Cantor-linked entity stands out from previous imitators, which has included obscure penny stocks. If Strategy is a high-volatility stock with a Bitcoin treasury, Twenty One is pitching itself as a full-on operating company – with revenue-generating plans, product ideas revolving around Bitcoin, and more.

“Twenty One could be a significant competitor to Strategy given the balance-sheet power that it is starting off with and its backers,” said Strahinja Savic, head of data and analytics at FRNT Financial. “It’s the only entity of its type that was purposefully created to acquire Bitcoin by leveraging the capital markets available to publicly traded corporations.”

Unlike Strategy, which pursued its Bitcoin ambitions solo as many on Wall Street looked askance, Twenty One — which came public via a SPAC — is launching with about $4 billion worth of Bitcoin, making it the third-largest Bitcoin treasury. 

The basis for many of the proposed endeavors are already in place. Cantor, the financial-services firm previously led by US Commerce Secretary Howard Lutnick, recently kicked off its Bitcoin financing business. Cantor helps manage Tether’s reserves and holds a convertible bond issued by the stablecoin operator.

“It does have the backing of some large and influential players within the crypto space, which is not only going to enable the company to tap into those firms’ resources, but also to make a much bigger splash in the market than it would have otherwise,” Mark Palmer, senior fintech and digital assets analyst at Benchmark, said of Twenty One.

Success isn’t guaranteed. Twenty One, under the leadership of Jack Mallers, will have to convince market participants that it’s far more than just another crypto play in order to raise capital at competitive prices. Meanwhile, life is getting tougher for crypto issuers seeking financing in the world of convertible debt. Representatives for Twenty One did not respond to requests for comment. 

Saylor, for one, sees the new rival as a validation of his years-long mission to convince boardrooms across America to maximize digital assets on their balance sheets. 

“It’s auspicious,” Saylor said on the sidelines of a conference in New York in April following Twenty One’s announcement. “It’s good for the entire industry because it’s generating positive awareness of the opportunity — and it’s very legitimizing to see these companies making big investments. I hope there are 10 more.”

In fact, the number of firms emulating Saylor has ballooned, with at least 30 publicly listed companies in the US. Bernstein analysts project that Bitcoin could see $330 billion in inflows via corporate treasuries before 2030. A subsidiary of Strive Enterprises Inc. is one of the latest firms to join the trend. 

Strategy holds roughly $55 billion of Bitcoin  — by far the most of any of its copycats — and has laid out plans to raise $84 billion to buy more by selling a combination of shares and fixed-income instruments.

For Strategy, this self-reinforcing cycle of leverage and momentum has been a big success. The company trades at a market capitalization that far exceeds the value of its underlying Bitcoin. That premium has fueled a 36% rally for the stock this year, versus the coin’s 6% gain. Last year, it bested the cryptocurrency by 238 percentage points.

Strategy has long served as a proxy for Bitcoin exposure, especially in the years prior to 2024, when Bitcoin ETFs first launched in the US. Yet even as a new generation of relatively cheap ETFs offer to amp up exposures to Bitcoin, Strategy still stands out as the ultimate way to go all-in on the original cryptocurrency, given the firm’s massive holdings and use of leverage.

“It’s attractive if you trade volatility,” said Wilfred Daye at Samara Alpha Management, which runs its own crypto hedge funds. “It’s a story that shareholders want to hear.” 

Twenty One’s prospectus lists a number of ambitions, among them “native lending models, capital market instruments, and future innovations that will replace legacy financial tools with Bitcoin-aligned alternatives,” alongside productions of “Bitcoin-focused content and media.”

“They have an actual business plan around Bitcoin that’s not just a treasury strategy,” Gustavo Gala, an analyst at Monness, Crespi, Hardt & Co. Inc., said of Twenty One. 

Yet it’s not difficult to see how this crypto-motion machine could lose its luster in the event of a market downturn. Investors could reach a point of exhaustion, for instance. Samara’s Daye points to some recent announcements of Strategy copycat plans that weren’t welcomed by the market — shares of GameStop Corp. initially tanked after it said last month that it would load up on debt to buy Bitcoin. 

“The market can become more sensitized to MicroStrategy’s strategy — shareholders get tired,” Daye, who is also the chief strategy officer of Mercurity Fintech, said. “So you do see a sort of polarization already.” 

–With assistance from Isabelle Lee, Muyao Shen and Yiqin Shen.

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