Bitcoin Financialization: Reshaping the Global Financial System

As the assets of Bitcoin spot ETFs surpass $50 billion and companies begin issuing Bitcoin-linked convertible bonds, the doubts of institutional investors regarding the legitimacy of Bitcoin have disappeared. The current focus has shifted to structural issues: how will Bitcoin integrate into the global financial system? The answer is becoming increasingly clear: the financialization of Bitcoin.

Bitcoin is becoming a programmable collateral and capital strategy optimization tool. Institutions that gain insight into this shift will lead the direction of financial development in the next decade.

In traditional finance, the volatility of Bitcoin is often seen as a disadvantage, but a recent issuance of zero-coupon convertible bonds by a certain company showcases a different perspective. This type of transaction converts volatility into upside potential: the higher the asset's volatility, the greater the value of the embedded conversion option in the bond. Under the premise of ensuring solvency, these bonds offer investors an asymmetric return structure while expanding the company's exposure to value-added assets.

This trend is spreading. A Japanese company has adopted a focus on Bitcoin strategy, and two companies in France have also joined the "Bitcoin Asset Management Company" camp. This approach echoes the strategy of sovereign nations borrowing fiat currency and converting it into hard assets during the Bretton Woods era. The digital version combines capital structure optimization with treasury value enhancement.

From the diversification of a certain electric vehicle manufacturer's treasury to a Bitcoin asset management company extending it to balance sheet leverage, these are just two cases of the intertwining of digital finance and traditional finance. The financialization of Bitcoin is penetrating various fields of the modern market.

Bitcoin as an all-weather collateral. According to data, the scale of Bitcoin staking loans will exceed 4 billion dollars in 2024, and will continue to grow in the centralized finance (CeFi) and decentralized finance (DeFi) sectors. These tools provide global all-weather lending channels— a feature that traditional lending cannot achieve.

Structured products and on-chain yields. Currently, a series of structured products provide embedded liquidity protection, principal protection, or enhanced yields for Bitcoin exposure. On-chain platforms are also evolving: initially driven by retail, DeFi is maturing into institutional-grade vaults, creating competitive returns with Bitcoin as the underlying collateral.

Beyond ETFs. ETFs are just the starting point. As the institutional-grade derivatives market develops, asset tokenization fund wrappers and structured notes add liquidity, downside protection, and yield enhancement layers to the market.

Sovereign adoption. As U.S. states draft Bitcoin reserve bills and countries explore "Bitbonds," what we are discussing is no longer diversification, but witnessing a new chapter in monetary sovereignty.

Regulation is not a barrier, but a moat for early actors. The EU's MiCA, Singapore's Payment Services Act, and the SEC's approval of tokenized money market funds (MMFs) all indicate that digital assets can fit within existing regulatory frameworks. Institutions investing in custody, compliance, and licensing today will have a leading position as global regulatory systems converge. A fund approved by the SEC for an asset management company is a clear example: a compliant tokenized money market fund launched within the existing regulatory framework.

Macroeconomic instability, currency devaluation, rising interest rates, and fragmented payment infrastructure are accelerating the financialization of Bitcoin. Family offices, which initially started with small directional allocations, are now borrowing against Bitcoin as collateral; companies are issuing convertible bonds; asset management firms are launching structured strategies that combine yield with programmable exposure. The "digital gold" theory has matured into a broader capital strategy.

Challenges still exist. Bitcoin still faces high market and liquidity risks, especially during times of stress; the regulatory environment and the technological maturity of DeFi platforms are also continuously evolving. However, viewing Bitcoin as infrastructure rather than a mere asset allows investors to occupy a favorable position in a system where appreciating collateral offers advantages unmatched by traditional assets.

Bitcoin remains volatile and is not without risk. However, under proper management, it is transitioning from a speculative asset to programmable infrastructure, becoming a tool for yield generation, collateral management, and macro hedging.

The next wave of financial innovation will not only utilize Bitcoin but will also be built on top of Bitcoin. Just as the Eurodollar in the 1960s brought a transformation in global liquidity, Bitcoin-denominated balance sheet strategies may create a similar impact in the 2030s.