Cypherpunk Holdings goes all in on Solana, rebrands as SOL Strategies

Cypherpunk Holdings (ticker: HODL) is doubling down on its strategy to buy and stake Solana’s native token — to such an extent that the publicly traded cryptocurrency investment firm has been renamed SOL +1.51% Strategies, it  announced on Thursday.

The firm, which only began buying SOL in the second quarter of 2024 (when former Valkyrie CEO Leah Wald took up the reins as chief executive officer), now holds over 86,000 solana (valued above $11 million at current prices, according to The Block’s data ), the majority of which are being staked to earn token rewards.

“We've continued to put more of our balance sheet into SOL and are trying to engage with the Solana ecosystem as much as possible,” Wald told The Block in an interview. “We are highly focused on the Solana ecosystem.”

If the SOL strategy seems reminiscent of MicroStrategy’s pivot to buying bitcoin back in 2020, it’s because of many similarities between the two firms’ “treasury management” styles. In short, if MicroStrategy’s massive bitcoin bags became a way for investors to gain exposure to that crypto asset, SOL Strategy would do the same for Solana.

In June, the firm, then still Cypherpunk Holdings, became one of if not the first publicly traded firms to put SOL on its balance sheet , making its stock a proxy vehicle for traders to gain exposure to the fastest-growing blockchain without having to buy the token outright.

“We think that MicroStrategy has been very successful at utilizing their treasury management strategy to accumulate bitcoin giving the market exposure to bitcoin via MSTR,” Wald said. (Cypherpunk did similarly when it bought its first 100 BTC in 2019.)

However, Wald clarified that it’s not a perfect comparison — because so much of SOL Strategies’ tokens are locked up earning yield in company-run validators, HODL is more akin to a bitcoin mining stock. Additionally, MicroStrategy regularly issues debt to purchase bitcoin, making its stock a play on leveraged bitcoin (the firm has $4 billion in debt and about $13 billion worth of bitcoin on its balance sheet ).

“No other companies are running a validator, and none of the staked-SOL ETPs for North America are approved,” Wald said. “It's an interesting time right now with 3iQ filing many months ago for a SOL ETP in Canada and VanEck filing for a SOL ETF in the United States.”

Most experts believe the U.S. Securities and Exchange Commission is unlikely to approve a SOL exchange-traded fund anytime soon, meaning that — at least for now — if institutional investors want exposure to SOL, buying SOL Strategies stock is one of the few available avenues.

To some extent, that’s also a page out of MicroStrategy’s playbook. When the Michael Saylor-helmed company began adding bitcoin to its balance sheet in August 2020, there were no bitcoin ETFs available in the United States. It wasn’t until October 2021 that ETFs based on bitcoin futures began trading; spot bitcoin ETFs hit the market in January of this year.

SOL Strategies purchased its SOL tokens for an average price of $143. It has earned over 230.35 SOL (worth ~$57,000) from staking as of June.

‘Rising Tide’

The change to SOL Strategies comes amid a period of rising interest in Solana, which has seen its userbase and transaction count skyrocket following the launch of memecoin launchpad Pump.fun in January. However, Wald said memecoins are likely a “fad” and that “the trend of continued interest on a more substantive basis for Solana is still increasing.”

Solana’s “immense throughput with minimal fees” is “going to start mattering … as more companies in the financial sector consider what blockchains they want to use to underpin their new projects,” Wald said, adding that she’s “very concerned about both Bitcoin BTC +1.08% and Ethereum's ability to affordably manage transactions on the base chain.”

That said, despite the name change and increased emphasis on Solana, SOL Strategies is still pursuing a multi-token, multi-equity investment strategy. Wald said the firm will maintain bitcoin as a treasury asset, and as of its latest financial statement, the firm still has equity investments in hardware wallet firm and eco-friendly crypto Chia.

Between March and July of this year, SOL Strategies sold off about 109 BTC and shed the entirety of its equity stake in metaverse firm Animoca Brands, which was once its second-largest investment. The firm has about approximately $4.9 million in cash and $115,000 in liabilities. Its other venture capital and equity bets have a book value of nearly $500,000.

Finally, when asked about the risk of the SEC one day approving Solana ETFs, thereby undercutting SOL Strategies’ current moat, Wald was nonplussed.

“In many ways, since Solana is more esoteric, we believe that a rising tide would lift all boats here,” she said.