From Sharplink to TRON: Imitating the new encryption manipulation techniques behind MicroStrategy

Jessy, Golden Finance

On June 16, the Financial Times reported that TRON has reached a reverse merger agreement with NASDAQ-listed company SRM Entertainment.

SRM Entertainment announced on June 16 that it has signed an agreement with private investors to utilize a $100 million equity investment to launch a treasury strategy for Tron (TRX) tokens. The new entity plans to inject $210 million worth of token assets and will be renamed “Tron Inc.”.

According to informed sources, the newly established “Tron Inc.” will adopt the MicroStrategy strategy of issuing convertible bonds to buy Bitcoin, purchasing and holding TRX tokens, and positioning itself as a leveraged digital asset investment tool. This move is also seen within the industry as an upgraded imitation of MicroStrategy’s “holding Bitcoin” strategy.

However, unlike MicroStrategy’s simple bet on the rise of Bitcoin through its purchase of Bitcoin, the TRX purchase strategy of Tron is more of a promotion for the TRX token itself. The more direct capital operation involves acquiring TRX through financing, which raises the price of TRX and thus stretches the value of TRX itself.

This move by TRON is not a precedent, Sharplink has also purchased Ethereum through financing, and like the close interest relationship between TRON and TRX, Sharplink and Ethereum itself also have a very high interest relationship.

Both Sharplink and Tron’s actions may herald a new beginning for the industry, where crypto companies not only actively seek to go public but also pursue financing to acquire their project tokens after going public. This marks the unfolding of a new mode of capital operations.

The essence of the Tron model and the MicroStrategy model is fundamentally different

According to the current information disclosure, TRON went public through a reverse merger with SRM Entertainment, establishing the new Tron Inc., and then imitated MicroStrategy by issuing convertible bonds to finance the purchase of TRX tokens.

Recently, the Nasdaq-listed company Sharplink, which announced its purchase of ETH, used $425 million in private placement financing (led by Consensys Software Inc., which is highly related to Ethereum) to buy ETH. Additionally, Ethereum co-founder and Consensys founder and CEO Joseph Lubin will serve as the chairman of Sharplink’s board.

Although there are differences in the specific operational methods of the two, they are essentially similar. Whether it is Tron Inc or Sharplink after being invested in, the act of purchasing TRX and ETH is deeply tied to their own interests, while MicroStrategy and a number of companies that follow suit in purchasing Bitcoin are merely third-party asset allocations.

If the rise and fall of Bitcoin’s price and the profits and losses of MicroStrategy investments rely on the consensus of everyone regarding “digital gold”, then the operation of Tron is completely a blatant act of pushing up the price of TRX with one hand while pulling it down with the other.

In terms of specific operations, it bypasses the stringent scrutiny of traditional IPOs and enters Nasdaq through a shell company with a market value of only $30 million, SRM. Subsequently, the Tron Foundation injects $210 million worth of TRX tokens into the new entity “Tron Inc.”, allowing the publicly listed company to instantly control 17% of TRX’s circulation. This also lays a dictatorial foundation for the company to manipulate the coin price. Ultimately, the new company is expected to finance the purchase of TRX through the issuance of convertible bonds, falling into a cycle of “issuing bonds - purchasing coins - pumping prices - and then issuing bonds”. Under such operations, the price of TRX can spiral upwards.

In a frenzy, the risk of being overlooked

After the trading announcement was released, the price of SRM soared over 300% on Monday, and TRX also surged in response, but the risks were overlooked by investors.

Although the operations of Tron are modeled after MicroStrategy, the risks associated with the cryptocurrency MicroStrategy approach are much higher. Firstly, the market capitalization and liquidity of TRX are far lower than that of Bitcoin. If “Tron Inc.” significantly buys TRX through financing, it may temporarily drive up the coin price, but this increase lacks genuine demand support and is essentially an artificially created illusion of liquidity.

MicroStrategy finances the purchase of Bitcoin by issuing bonds and stocks, essentially betting on asset appreciation using low-interest debt. This strategy relies on the long-term appreciation trend of Bitcoin. However, if the TRX price falls, “Tron Inc.” may face risks of insufficient collateral, debt default, or forced liquidation.

The risk of regulation has always existed, although the current SEC investigation of Sun Yuchen has been suspended, but it does not represent the exit of supervision, especially the SEC’s operational attitude towards cryptocurrency-related securitization is still cautious, although the attributes of TRX tokens have not yet been clearly determined at the regulatory level in the United States, but if TRX is identified as a “security”, then financing, holding positions and other behaviors must comply with the provisions of the Securities Act of 1933 and other provisions, otherwise it may constitute an illegal issuance.

Moreover, the trading operator Dominari Securities has close ties with the Trump family, and Eric Trump is expected to hold a significant position in the newly established “Tron Inc.”. This association may also attract the attention of U.S. regulators.

In terms of financial operations, the “consensus basis” and “hedging properties” of TRX are far inferior to Bitcoin. The operations of Tron resemble the speculation of cryptocurrency market capitalization by utilizing the shell resources of publicly listed companies. The core risk is still betting with high leverage on an asset that has weak liquidity, ambiguous regulatory definitions, and lacks independent value support. Once the market environment reverses or regulations tighten, the bubble will burst.