Cantor Fitzgerald Joins Tether, Bitfinex and SoftBank in $3B Bitcoin Venture

 This partnership is set to create a publicly traded firm aimed at tracking Bitcoin's performance through direct holdings, according to Financial Times.

The new firm, called 21 Capital, is backed by contributions from each partner, as they aim to replicate the success of prominent crypto investors like MicroStrategy.

The Players Involved

Cantor Fitzgerald, a well-established financial services firm, is taking the lead in this high-stakes Bitcoin venture, driven by Brandon Lutnick, who recently assumed the role of chairman. 

Lutnick, son of U.S. Commerce Secretary Howard Lutnick, is leading Cantor Fitzgerald’s deeper push into crypto. His firm will run the investment vehicle through Cantor Equity Partners, a SPAC that raised $200 million earlier this year.

The key players backing 21 Capital are no strangers to the cryptocurrency world. Tether (USDT), one of the largest stablecoin issuers, will reportedly contribute $1.5 billion in Bitcoin to the fund. Bitfinex, a leading crypto exchange also under the same parent company as Tether, is set to add $600 million. SoftBank, the Japanese multinational conglomerate, will provide an additional $900 million, bringing the total Bitcoin contributions to $3 billion.

The venture will also raise $350 million via a convertible bond and $200 million through private equity to buy more Bitcoin. The goal is to create a public investment vehicle that tracks Bitcoin’s price through direct holdings, a model proven by MicroStrategy.

Aiming to Replicate MicroStrategy's Success

The strategy behind 21 Capital is inspired by the success story of MicroStrategy, a software company that made headlines by shifting its corporate strategy to Bitcoin investing. MicroStrategy, which has accumulated over 530,000 BTC, saw its market valuation soar after adopting this strategy, despite Bitcoin’s price volatility.

MicroStrategy raised funds through the issuance of both debt and equity to amass Bitcoin. Its model has become a case study for other companies looking to integrate cryptocurrency into their portfolios, despite the inherent risks. The company’s Bitcoin holdings are currently valued at over $36 billion, and its success has drawn considerable interest from institutional investors and major corporations.

Cantor Fitzgerald's new Bitcoin investment vehicle, 21 Capital, is designed to operate along similar lines, accumulating Bitcoin through the contributions of its high-profile partners. The vehicle will also raise additional funds to purchase more Bitcoin and convert these contributions into shares in 21 Capital at $10 per share, valuing Bitcoin at an internal price of $85,000 per coin.

Timing Is Everything

Bitcoin has seen a resurgence in value, reaching all-time highs, with the price of a single Bitcoin briefly surpassing $109,000 after the election of Donald Trump as president. While Bitcoin’s price has since fluctuated, it remains near its historical highs, hovering around $93,500 per coin.

This renewed interest in Bitcoin comes as a response to both its potential as a store of value and the broader institutional adoption of cryptocurrencies. The Trump administration’s more accommodating stance toward cryptocurrency trading has provided a favorable environment for crypto investments. Cantor Fitzgerald, in particular, has benefited from these favorable policies, advising on major investments like Tether’s $775 million stake in the video-sharing platform Rumble.

The involvement of SoftBank, Tether, and Bitfinex in the venture highlights the growing influence of cryptocurrency in traditional financial markets. Per reports, 21 Capital offers a regulated, public option for investors seeking exposure to Bitcoin's growth.

Regulatory Considerations and Future Outlook

Although the deal is expected to be announced soon, the details could still change, and there is always the possibility that the deal may not materialize as planned. 

Regulatory hurdles in the cryptocurrency sector are always a consideration, especially given the challenges that Tether and Bitfinex have faced in the past. Both companies settled significant regulatory investigations with the New York State Attorney General and the U.S. Commodity Futures Trading Commission in 2021, which adds an element of uncertainty to the venture.

However, the trend toward cryptocurrency adoption continues to gain momentum. The broader market is embracing Bitcoin as both a digital asset and a hedge against traditional financial systems.