Wall Street's encryption alchemy: how convertible notes can turn alts into a capital perpetual motion machine?

As the complex gears of traditional financial engineering mesh with encryption assets, an "infinite money game" driven by convertible notes and equity financing is unfolding. Research by Animoca Brands shows that publicly traded companies mimicking Strategy have achieved an average stock price rise of 161% by announcing their Token Holdings strategy, thus creating a perpetual motion wheel of "announcement-fundraising-buying coins-stock price big pump." This arbitrage mechanism, which has made Wall Street a fortune, is being replicated in the alts market such as ETH, SOL, and XRP.

Financial engineering creates an encryption perpetual motion machine The core operational mechanism shines. 1️⃣ Issuing convertible notes/equity to raise fiat funds 2️⃣ The announcement will use funds to purchase specific encryption assets. 3️⃣ Market frenzy drives up stock prices, creating financing premiums. 4️⃣ Premium funds are cycled into Token purchases Animoca reports that: "This model of using traditional financial tools to continuously inject capital into the acquisition of encryption assets has formed a self-reinforcing capital flywheel."

Altcoins may become a more ideal arbitrage vehicle Data shows that listed companies adopting altcoin holdings strategies have experienced a big pump in stock prices:

• Average rise on the day of the announcement: 161%

• 7-day cumulative rise: 185%

• 30-day cumulative rise: 226% "Compared to the mature market of Bitcoin, the altcoin ecosystem is still in its early stages, providing broader arbitrage opportunities and growth runway for financial engineering," the report emphasizes. It is worth noting that these operations have not significantly affected the spot prices of the related tokens.

  

Token wrapping premium and ETF vacuum Behind the phenomenon-level trend lies a dual driving force: 🔥 Equity Wrap Premium Effect: Investors are more inclined to gain exposure to altcoins through the equity of listed companies rather than directly holding Tokens. 🔥 ETF Market Vacuum: The lack of compliant altcoin ETFs forces Wall Street capital to flow into strategy companies. "This essentially creates a structured pipeline for traditional capital to enter the encryption market," the report added.

The Fatal Gear of the Perpetual Motion Machine Despite the remarkable short-term gains, this model harbors systemic risks: ⚠️ Leverage Risk: A continuous decline in Token prices will trigger a leverage chain reaction of convertible notes. ⚠️ Liquidity Crisis: Small and medium market cap Tokens struggle to withstand institutional selling pressure. ⚠️ Regulatory Arbitrage: The SEC may reconsider the securities classification of "Token Wrapping". Animoca analysts warn: "When market sentiment reverses, the capital tower built on expected Arbitrage may collapse in an instant."

Conclusion: Institutional Arbitrage on the Edge Wall Street is transplanting the refined results of a century of financial engineering into the crypto world, where convertible notes and equity financing have deeply intertwined with the token economy. This "perpetual motion machine" that operates in the gray area of regulation not only opens up new paths for traditional capital to access crypto, but also sows the seeds of leverage crises in the off-chain world. When the last arbitrageur exits, will what remains be a new financial paradigm, or yet another carefully designed money game?

(Source: CoinDesk)