Through the Looking Glass: Bitcoin Treasury Companies

TL;DR

This paper examines the rise of Bitcoin treasury companies, analyzing how leverage through debt and collateralization drives their growth, and discusses an extension of the Kelly criterion incorporating divergence measures.

Contribution

It introduces an extension of the Kelly criterion to account for uncertainty using Bregman divergence, applied to Bitcoin treasury strategies.

Findings

Leverage significantly influences Bitcoin treasury company growth.

The extended Kelly criterion provides a new framework for decision-making under uncertainty.

Bitcoin treasury companies amass billions in tokens across numerous entities.

Abstract

Bitcoin treasury companies have taken stock markets by storm amassing billions of dollars worth of tokens in hundreds of entities. The paper discusses, how leverage - whether created through corporate debt or investors using stock as loan collateral - fuels this trend. The extension of the binary-choice Kelly criterion to incorporate uncertainty in the form of the Kullback-Leibler divergence or more generally Bregman divergence is also briefly discussed.