A transient speculative bubble or building block of the capital markets ecosystem?

James Skinner, Co-founder of Fusion Growth Labs

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Wholesale Investor Disclaimer: For wholesale investors only. This note is for information purposes, is not financial advice, and does not constitute an offer. Past performance is not indicative of future returns.

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I began research for this article from a position of interest and scepticism toward Bitcoin (BTC) reserve companies, aiming to break down their mechanics, market role, and risks so we can better understand whether they represent a genuine strategic opportunity or simply another speculative cycle.

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A BTC reserve company is a corporate or investment vehicle that holds Bitcoin as a reserve asset, positioning it alongside cash, treasuries, or gold. Unlike a passive buy-and-hold strategy, many of these structures employ leverage or synthetic instruments to amplify returns or manage risk. Increasingly, BTC reserve companies entities that maintain large Bitcoin treasuries and trade as NAV-sensitive vehicles (e.g. MicroStrategy) sit at the intersection of crypto markets, sovereign debt flows, and corporate liquidity management. While they dilute Bitcoin’s original libertarian ethos, their integration into sovereign and institutional finance has cemented them as a distinct asset class within the global capital markets ecosystem.

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The crypto financial ecosystem is rapidly converging with traditional capital markets. A mix of deregulation, stablecoin-backed U.S. Treasury integration, and the rise of large centralised platforms is turning crypto assets from speculative instruments into essential financial infrastructure.

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1. Macro Crypto Thesis

1.1 Deregulation & Tokenisation of Financial Markets Globally

● U.S. policy direction is enabling tokenised securities (equities, bonds) and integrating DeFi into regulated frameworks.

● The SEC’s “Project Crypto” signals willingness to permit equity-like crypto instruments in compliant venues.

● Tokenisation expands the legitimacy, scale, and liquidity of crypto linked assets.

● This is demonstrated by the August 2025 executive order opening 401(k) plans to BTC and other alternative assets.

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What is misunderstood with this move is the deregulation of traditional markets, the shift to tokenised assets is not simply a technological upgrade, but a structural change that policymakers are leveraging to roll back regulatory friction under the banner of innovation. By migrating equities, bonds, and other instruments onto tokenised rails, they can bypass legacy infrastructure that enforces settlement rules, jurisdictional boundaries, and disclosure regimes.

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In practice, this creates a parallel financial system with fewer gatekeepers and lighter oversight, yet one that remains tethered to sovereign debt markets and corporate capital flows. Instead of dismantling the old framework head-on, policymakers can route capital through this tokenised layer where enforcement is more flexible, market access is broader, and certain restrictions, from short-sale limits to cross-border capital controls, can be eased or sidestepped entirely.

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The result is a form of regulatory arbitrage baked into the architecture of the new market, making it appear innovative while functionally deregulating large swathes of traditional finance.

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1.2 Centralisation of Crypto Infrastructure

● While originally decentralised in ethos, the core infrastructure has become highly centralised:

- Few developers control most BTC code commits (functionally similar to a central bank board).

- Miners comply with OFAC sanctions and blacklist addresses, mirroring regulated payment frameworks.

● Platforms like Binance, Bybit and Coinbase now act as critical financial plumbing for global markets.

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BTC’s original libertarian vision of decentralisation has given way to a highly centralised reality, where control and influence are concentrated in a small number of actors. A handful of developers oversee most of the code commits, operating in practice much like a central bank’s decision-making board. Miners now comply with regulatory directives such as OFAC sanctions, actively blacklisting addresses in a manner that mirrors regulated payment systems. Meanwhile, centralised exchanges like Binance, Bybit, and Coinbase have become indispensable infrastructure for global markets, functioning as the primary gateways for liquidity, custody, and compliance. In this evolution, BTC has shifted from being a tool of financial sovereignty to becoming embedded within and dependent upon the very institutional and regulatory frameworks it was designed to bypass.

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Many libertarian minded individuals, myself included, view this shift as a negative. However, from a purely financial investment return perspective, it accelerates mass adoption and drives significant capital inflows from the traditional financial system.

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1.3 Stablecoins as USD Debt Infrastructure

● Dollar-backed stablecoins (e.g. USDT, USDC) are now major holders of U.S. Treasuries (Tether 7th largest in the world), surpassing sovereign nations such as Germany and Canada.

● Acts like the GENIUS Act require stablecoins to be backed by liquid, audited reserves, often in the form of US Treasuries. While this creates a parallel “digital bond market,” stablecoins still function as currency. The yield (carry) from those Treasuries is retained by the stablecoin issuer, not the holder, unlike direct bond ownership where the investor captures carry and potential capital gains or losses.

● This creates a shadow central bank system, facilitating shadow QE and expanding dollar liquidity outside traditional Fed channels.

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Dollar backed stablecoins are emerging as a viable fiscal stabilisation tool, with the potential to become major holders of U.S. government Treasury debt, supporting dollar dominance and addressing sovereign debt distribution challenges. They could form a “digital bond market” that increases demand for Treasuries and reinforces confidence in U.S. fiscal instruments, aligning closely with the thesis on crypto’s growing financial utility. Recent U.S. legislation, such as the GENIUS Act, reinforces this vision by requiring stablecoins to be fully backed with liquid, audited reserves, effectively transforming them into credible instruments of money and payments.

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Implication: These three forces, deregulation, centralisation, and stablecoin integration into sovereign debt markets, will likely trigger an explosion of crypto asset adoption and market capitalisation.

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2. BTC 4-Year Cycle and Macro Linkage

Strategic Timing in a Macro-Linked BTC Cycle

● The BTC price cycle has historically aligned closely with U.S. stock market highs.

● We have not seen a decoupling from equity market cycles, yet, suggesting macro-driven risk events (rate hikes, liquidity shifts) may still drive BTC pullbacks.

● As we approach the late phase of this cycle, we would typically expect sharp corrections as BTC distribution phases into altcoins and liquidity rotates.

● This cycle linkage has strategic implications for timing NAV sensitive BTC reserve positions and for managing leverage.

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Recent coverage suggests that this historic 4 year cycle may be breaking down under the influence of institutional capital inflows, ETFs, and regulatory maturation. Analysts such as Bitwise’s CIO cite diminishing relevance of halvings and note that pro‑crypto forces like institutional adoption and stable regulatory frameworks are overriding traditional cycle patterns

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3. Dry Powder

● USD $2.515 Trillion in dry powder (uninvested capital) remains on the sidelines down 7.7% from the 2023 high with over 24% raised more than 4 years ago. Investors are impatient.

● This capital can accelerate parabolic rallies when sentiment flips to risk on.

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The current USD 2.515 trillion in dry powder represents a powerful catalyst for markets once sentiment turns risk-on. With nearly a quarter of this capital raised more than four years ago, investor pressure to deploy is building, creating a readiness to move quickly when conditions improve. Such pent-up capital can act as accelerant fuel, compressing buying activity into short timeframes and triggering sharp, parabolic rallies across risk assets. In a crypto context, this dynamic is amplified by the sector’s liquidity profile and reflexive nature, where inflows rapidly compound price momentum and attract additional capital from both institutional and retail participants.

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4. Strategic Implications for BTC Reserve Companies

● Leverage & NAV Sensitivity: MicroStrategy style vehicles act as leveraged BTC proxies, with equity prices magnifying BTC volatility.

● Debt Structures: Low-cost debt financing enables long term BTC accumulation. However, contract rollovers and interest rate risk must be monitored particularly if macro liquidity tightens.

● Market Positioning: If BTC has sharp corrections:

- Downside risk is cushioned by corporate balance sheets.

- Vehicles may trade at discounts to NAV, creating opportunistic entry points.

- Stablecoin demand and centralised infrastructure growth will persist regardless of spot Bitcoin levels.

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5. Strategic Outlook

This is not another transient speculative bubble like the Metaverse, Vegan meats or cannabis stocks. Instead:

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● Crypto assets are becoming integral to sovereign debt issuance (stablecoins buying Treasuries).

● They are increasingly embedded in corporate liquidity management and digital capital formation.

● Even if BTC’s libertarian purity fades, integration into the financial system makes the asset class politically and economically too important to fail.

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About the Author

James is an accomplished entrepreneur with an extensive background in financial services focusing on Fund Management, Capital Raising, Equity Markets, Corporate Structuring & Operational Strategy. James has built and exited multiple start-ups, completed more than 15 stock exchange listings in London, Paris, Frankfurt and New York and M&A transactions taking high growth start-ups from zero to exit plus a significant amount of transactional work including highly complex multi country cross border transactions and stock exchange listed management buyouts. In the mid 2000’s James worked closely with the founders of ASSOB, building the original start-up ecosystem in Australia and the world’s first equity crowd funding platform recognised by the world bank for its contribution to global innovation.

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Today James is the co-founder of Fusion Growth Labs, UniQuest Extension Fund investment fund consultant working in partnership with the University of Queensland. His focus is on world-class innovation & research that solves industry’s most critical problems, bridging academia, industry, capital and the start-up ecosystem to build companies that strengthen Queensland’s innovation ecosystem, advance Australia’s sovereign capability, and enhance global competitiveness.

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Important Disclaimer (Author) – For Wholesale Investors Only

This document is intended solely for wholesale clients as defined under section 761G of the Corporations Act 2001 (Cth). It is provided for informational purposes only and does not constitute financial product advice, legal advice, or a recommendation to acquire or dispose of any financial product or service.

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This material does not constitute an offer or solicitation to the public and is not intended for distribution to, or use by, retail clients. Any statements about performance, returns, or strategy are illustrative only and are not guaranteed. Past performance is not a reliable indicator of future performance.

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Investing in digital assets and algorithmic strategies involves significant risk, including the risk of capital loss. Recipients should conduct their own independent due diligence and seek professional advice before making any investment decisions.

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This document is confidential and must not be copied, distributed, or reproduced without the prior written consent of the issuer.

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Disclaimer (Kings Gate Capital Partners)

This article is intended for wholesale investors as defined under the Corporations Act 2001 (Cth) and is not intended for retail investors. The information provided herein is for general informational purposes only and does not constitute financial, investment, or professional advice.

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The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of Kings Gate Capital Partners. While every effort has been made to ensure the accuracy of the information, Kings Gate Capital Partners makes no representations or warranties, express or implied, as to the completeness, accuracy, reliability, suitability, or availability of the information contained in this article. Any reliance you place on such information is therefore strictly at your own risk.

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Investing involves risk, including the potential loss of principal. Past performance is not indicative of future results. Before making any investment decision, you should seek independent financial, legal, and tax advice tailored to your specific circumstances.

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This article may contain forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially from those expressed or implied in such statements. Kings Gate Capital Partners disclaims any obligation to update or revise any forward-looking statements to reflect new information or future events.

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For more detailed information contact us directly.

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References

1. Ryan, P. (2024). Money by Vile Means.

2. SEC. (2024). Project Crypto: Integration of Tokenised Assets into Regulated Markets.

3. GENIUS Act (2024) – U.S. legislation mandating audited, liquid reserves for stablecoins.

4. Glassnode & Messari data – BTC 4-year cycle metrics and equity correlation analysis.

5. Tether Reserve Reports – holdings of U.S. Treasuries as % of total assets.

6. MicroStrategy Investor Reports – debt structures and BTC reserve strategy.

7. https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/7/global-private-equity-dry-powder-continues-fall-from-2023-peak-91374487

8. https://bitbo.io/news/tether-us-treasuries-7th/?utm_source=chatgpt.com

9. https://www.cnbc.com/2025/08/08/bitcoin-btc-price-cycle-might-be-breaking.html

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