Twenty One Capital records a loss of $413.5 million: bitcoin treasury on the verge of transformation
The second quarter proved to be a period of serious financial turmoil for Twenty One Capital, a structure backed by Tether. The company's net loss amounted to $413.5 million, directly linked to the correction in the cryptocurrency market. This event coincided with a change in leadership: new CEO Raphael Zagury has already announced plans to radically rethink the business model, aiming to take the firm beyond a simple bitcoin treasury.
An analysis of the financial statements shows that the bulk of the losses—$401.5 million, or 97% of the total loss—came from the revaluation of digital assets. Despite this, the company's balance sheet remains impressive: 43,514 BTC, equivalent to approximately $2.78 billion. This makes Twenty One Capital the second-largest public holder of the leading cryptocurrency in the world. At the end of the reporting period, the firm also had $106.1 million in cash and $484.5 million in convertible bond debt.
The market reaction was swift: XXI shares fell 1.7% to $4.5 in the latest session, and their value has plunged nearly 50% since the start of the year. Investors are clearly disappointed, and the current mNAV ratio of 0.7x only confirms that the market values the company at a significant discount to its bitcoin reserves.
Strategic Pivot
The report was published three weeks after founder Jack Mallers handed the reins to Zagury, deciding to focus on his payment project Strike. As part of this reorganization, Strike also abandoned plans to merge with Twenty One. Now, the company is considering acquiring mining firm Elektron Energy, which Zagury previously led.
In his letter to shareholders, the new CEO acknowledged that the results raise many questions. He emphasizes: "We have one of the largest bitcoin balance sheets on the public market. That is an advantage, but for the firm to be worth owning, it must become something more than just a bitcoin treasury." Among the priorities for the coming year are strengthening corporate governance, building operational businesses, developing capital markets expertise, and, as an end goal, launching bitcoin-backed lending. Zagury sees Berkshire Hathaway as the long-term benchmark—a strong balance sheet combined with independent cash flows.
My view: this is a classic example of the evolution of a mature crypto player. The market is no longer willing to pay for a "bag of bitcoins" without added value. Transitioning to a model that generates income is the only way to justify the valuation. However, ambitious plans will require not only time but also flawless execution amid volatility.