Ri`ght. Apologies for the slight delay, but welcome to a group presentation call with K33 in relation with today's announcement of contemplated direct share issue to finance the acquisition of up to 1,000 Bitcoin. As mentioned in the press release earlier today, the company has received pre-commitments of SEK 85 million, and the application period is expected to close on the 19th of June, so tomorrow at 5:30 P.M. I will now hand over to Torbjørn, the CEO and co-founder, who will walk you through our presentation before we can open up the floor for a Q and A through the Q and A function up front. I'll leave it to you, Torbjørn.
Thank you so much. That is a really long way to say that at K33, we are in the process of buying Bitcoin. The big question then is, what is K33 and why are we doing this? What is the strategic rationale for us to do it, and what differentiates us from the other Bitcoin treasury companies out there? That is what I am going to talk about, and then I am happy to answer any questions in the Q and A session after. Some disclaimers first. I think we should start then with Bitcoin. I think it is really important to internalize that back in 2008, Bitcoin was only an idea, an eight-page document on an email list for nerds. Now, Bitcoin is a strategic reserve in the U.S. The U.S. spot ETFs for Bitcoin became the most successful launch in history.
Bitcoin started out as an alternative to banks financed without a middleman. Yet right now, we're seeing the big financial institutions all over the world embracing the industry, particularly in the U.S. The EU is coming a little bit after, but with new regulation in place in the form of MiCA, I anticipate that financial institutions will come into this space from next year and onwards. I think what we are witnessing right now is the emergence of Bitcoin as a part of the global financial system. In the past, it was mainly a speculative object, an investment object for those with a special interest in the technology or the political possibilities around it.
Now, we're seeing that Bitcoin actually has a fair shot of becoming a future global reserve currency, an asset that is completely borderless, that is not tied to any one jurisdiction, that is censorship resistant, and is not struggling with a debt overhang such as the dollar and other fiat currencies. Against this backdrop, I and a lot of others anticipate that Bitcoin will become way more important in the financial system in the coming years and way more valuable. The question I get from our shareholders all the time is, how will K33 capitalize? The answer is actually simple. The main service we're running operationally is providing access for those who want to buy, store, and sell Bitcoin if they have to without worry. The challenge out there is that there are a lot of different exchanges.
There's actually hundreds of exchanges to choose from, but it's really, really hard to find one that you can trust. Some might be very user-friendly, but have really high fees. With others, you risk that your funds get frozen when you withdraw them, that you get stuck without being able to speak to someone at support that can help you. I believe that when we're looking at the current landscape, it's not good enough. The future of finance cannot be built on how the crypto industry has been. That's why we're building K33, because we believe investors deserve something better. What you get with K33 is an institutional-grade trading infrastructure. You get personalized support, superior pricing, full FX flexibility, direct bank deposits in your preferred fiat currency. We're able to offer this because we are working with larger clients.
We're working, on the one hand, with high-net-worth individuals, family offices, but on the other, we're also working with corporations. We're working with businesses that are increasingly relying on stablecoins or Bitcoin as a part of their operation. We are supporting other Bitcoin treasury companies. When they are buying and custodying Bitcoin as a part of their strategy, they're doing it with K33. We're working with other financial institutions. We have hedge funds, other crypto brokers using us as a platform to source prices, to kind of source liquidity. We're in dialogue with several players from traditional finance, figuring out how to launch products with them and K33 as a partner. Looking at our users then, they really like what we're adding.
I have people who've been trading in the crypto market for a decade that are switching over to K33 and really expressing their gratitude for the service, the speed of settlement, the quality of support, the firmness of our prices. In addition, we see that we're getting new clients and partners every week. In Norway, we were working with public entities when the police, for instance, have to sell Bitcoin after a seizure. We're working with, as I mentioned, other traditional financial players. I mean, even onboarded a Norwegian bank that has done its first Bitcoin purchases through K33. So far, those purchases have mainly been about learning, kind of getting up the learning curve rather than a big financial commitment. But my hypothesis is that this will change in the future.
This will change for the rest of the year, next year, when more and more financial institutions truly will embrace Bitcoin and the digital asset space. It is not only happy customers we get. We get strong growth. We launched K33 back in Q3 of 2023, and since then, we had six quarters of strong consecutive growth. For Q1, we grew 200% year over year. We grew 20% compared to Q4, despite the general market actually seeing a drop of 10%. We are outgrowing the market, and we expect this to continue in the quarters and the years to come. Our numbers are still tiny. The market opportunity is massive, even before you take into account the general industry growth that we anticipate over the coming years. We have achieved this while building up the service.
This is not growth that we realized after we kind of invested for a long period and then had the full product. This is the growth we realized while fixing things on the fly. That said, our platform is now rock solid. We're now iteratively adding new features. We recently added instant 24/7 bank deposits leveraging PSD2 open banking. We will very shortly launch limit orders on the platform, and we're doing kind of the changes to fully accommodate for partners so that we can distribute the K33 products through other providers. If we then take a big step back and look at the market opportunity for such an operation, a digital asset brokerage, I think it's valuable to take a look at the global wealth management market. And the revenue there is estimated to be around $1.5 trillion annually. That's revenue. That's the margin that the industry is making.
If we very conservatively assume an average allocation of 4% to Bitcoin and digital assets, and we assume also margins related to that in line with other alternative investments, we are looking at a revenue potential of around $100 billion globally and a quarter of that from the European market over the next coming years. This is the true reason why financial institutions are coming into the space. It's not because they suddenly are embracing a world without financial intermediaries. It's because their clients want access, and they see that there's money to make from making that access a reality. Their challenge, of course, is that they don't know the industry. They don't know the market, and they don't have the products. That's where K33 comes in. We will be the preferred partner for traditional financial institutions in the Nordics and beyond who want to get into this sector.
In Europe, the EU has passed what is called MiCA, Markets in Crypto Assets. It is a regulatory framework similar to what the EU is having for securities, but for crypto assets. This is really driving the institutional adoption of Bitcoin and cryptocurrencies in the EU as we speak. A key component of MiCA is the clarification that if you are a bank or another licensed traditional entity in the EU, you do not need a new license to launch a crypto product. You need to have a partner. You need to have the product, and then you need to notify your regulator. This is a massive shift. This regulation will push a lot of the kind of cutting-edge innovation out of Europe. That is the downside.
For a company like K33, this will really accelerate the entrance of banks, brokers, asset managers, wealth managers, the client segment where we expect to see the most growth over the coming years. We have the platform. Regulation is there. Client demand is there. What's blocking us from truly realizing this potential now? The last piece that has been missing for K33 is a strong balance sheet. This is a core reason why we launched our Bitcoin treasury strategy. We're a financial company. Yes, we leverage a lot of technology in the services that we deliver, but we're at the bottom of a financial company. As a financial business, our balance sheet is the basis for all our value-added services. We are strong believers in Bitcoin. We are holding Bitcoin personally. We are advising our high-net-worth and family offices clients to invest in Bitcoin.
For us as a business, it really makes sense to invest in Bitcoin as well, to hold it on our balance sheet, to get the direct exposure to that appreciation. What is truly differentiating is that by doing so, we're also unlocking operational synergies. Strategically, we've been looking at a lot of the different Bitcoin treasury companies out there, learning the best practices, and then figured out our path. Our goal now is to get to 1,000 Bitcoin as soon as possible, conditional on good terms for our investors. We're now raising our second round, and we're continuously building up the balance sheet by conducting the Bitcoin purchases. To drill a little bit further down into exactly how we envision using our balance sheet, I think it's important to realize that when you look at the crypto space, it's a very strange market structure.
I have 10 different accounts on 10 different trading venues to get access to the full market. That doesn't make sense. In traditional finance, you will typically have one broker, one platform where you do KYC, one platform where you keep your portfolio consolidated, not fragmented across a ton of different venues, one platform with the fiat rails that you really like, the support that you really like. It is the broker's job to give you access to the whole market. That is what we're building with K33. To do so, we need a balance. We have accounts on all of the big exchanges. By using our balance as collateral, we can mirror out those exchanges, those markets to our clients.
We can mirror out there a bit, Binance, Coinbase, all of the markets, all of the products, all of the features without building them ourself, but by offering what is called matched principal trading. The matched principal part is really important because we are not going to take risk on our Bitcoin. We're not going to rehypothecate our Bitcoin. We're not going to do option strategies on our Bitcoin. We're going to hold the Bitcoins long and strong. By using the balance sheet as a pledge, as a collateral, we can get a credit on these venues.
We can lock in the trades that our clients are doing with us on the venue itself, back to back, and through that, mirror out exchanges without taking market risk on the Bitcoin, without kind of building up or trying to replicate what Binance and Coinbase, Kraken, and others have done beautifully already. Another important vertical will be Bitcoin collateralized lending. I think this is a segment that will explode in the coming years. Yet the challenge for banks is that they do not know how to deal with Bitcoin as collateral. From a capital requirements perspective, it is extremely expensive. They have to hold double capital if they rely on Bitcoin collateral. Economically, that does not make sense because Bitcoin is liquid 24/7, and if you have an over-collateralized loan, there is actually zero counterparty risk for the creditor.
The model we are right now exploring in K33 is one in which a bank writes a loan to a client. The client has a collateral or move their Bitcoin to K33, and we have a pledge over that. Then K33, as a business, writes a guarantee to the bank. The bank cannot have the guarantee coming directly from the Bitcoin itself, kind of the collateral of the client, but it can have the guarantee written by a well-capitalized company. We, on the other hand, are more than happy to deal with Bitcoin collateral. I mean, we're doing custody, we're doing trading all day. This is our bed and breadth.
Through this type of setup and then loan distribution license, we can actually issue loans with a bank partner backed by Bitcoin, enabling our clients to free up liquidity, either to buy more Bitcoin, to buy a house, pay their taxes, whatever, and really scale this. We are in conversations with several banks, and it is a very promising track. Yet again, another track that really requires that we have a strong balance. The list goes on and on. The long story short, with a strong balance, K33 can truly become a dominant and leading broker in Europe, really bringing trading of Bitcoin to the next level of maturity. It will enable us to partner with other banks. It has already improved our margins on our trading from the Bitcoin we have already bought.
We get all of these operational benefits while fully embracing Bitcoin as a treasury company by building as much Bitcoin per share as possible in accredited ways to our shareholders, being long-term exposed to the upside and the importance of Bitcoin as an asset. We are growing fast. The client demand is there. The trend is clear, and we can definitely see it, especially from the U.S. It is going to come to Europe. In Europe, K33 is a leading candidate. We are right now raising money to buy more Bitcoin, to be exposed to the upside of Bitcoin, and to unlock these operational synergies. I am happy to take questions.
Thank you. Thank you, Torbjørn. Okay, a couple of questions are coming in here. First of all, with regards to the structure, there is one question on how K33 has been previously mining BTCs.
The question is whether you've sold those or kept on to those, and what's the plan going forward with regards to financing the acquisition of more Bitcoins?
Absolutely. In K33's past, we were called Arcane Crypto, which was an investment company. As a part of Arcane Crypto, we had a mining operation. It was extremely lucrative. It was a reflection of our long-term belief in Bitcoin, but it was located in southern Norway. When we invested in that mining operation, two things happened. Interest rates came up, and Bitcoin tanked 60% very quickly. That was fine. We had taken that into account in our modeling, just as we do with our Bitcoin treasury strategy. At the same time, Russia invaded Ukraine, and energy prices in southern Norway went 100x.
That made it a non-profitable business in southern Norway, which led us to then relocate the machines to northern Norway. We continued to mine for a while, but then we have decided to move out of mining. It's a very specialized line of business. As we see it, we don't have the competitive edge on mining. We're working with miners, on the other hand, enabling them to sell their Bitcoin when they have kind of electricity bills, etc., to pay. On the financing of future Bitcoin purchases, we will use the capital market actively in ways that are accredited to our shareholders. The current round is a round that was set at market, issuing new shares, using that capital and the proceeds to buy Bitcoin.
Over the longer term, as we scale the business and scale our profit, I would also assume that we would allocate parts of that profit to Bitcoin to strengthen the balance even further.
Yeah. I guess as a follow-up on that one, it's a question of whether you consider any buybacks going forward, but I mean, you have problems.
At the moment, I'll do Bitcoin buys before we do buybacks. For the longer-term future, I can't speak for that, but the main goal now is to use the funds raised to buy Bitcoin and build a strong balance sheet with 1,000 Bitcoin as the first kind of milestone, but we're going to scale from there as well.
Yeah.
It's one commentary complementing the development and a start to a great journey, but also wonders what, and you've been touching on that throughout the presentation, what's the key takeaway on what separates you from a Bitcoin hold call or traditional, or what we see out in the market now with these more clear-cut hold calls?
Yeah. No, I think it's very clear, right? We are not an AI consulting service. We're not coming from another industry. We're coming from this industry. We get the full benefit of having Bitcoin on the balance sheet. We get the same upside exposure. We get all of the same dynamics as the pure plays. We have this extra effect, which is that it accelerates our operational business without risking the Bitcoin.
I believe that in the future, those with the biggest Bitcoin balances will be the financial giants of global finance. If you look at the financial system, it's the biggest balance sheet that is the most important player. For the future financial system, I think it's the biggest Bitcoin stash that will become the most important player. I anticipate that several of these pure plays will find themselves in a situation where they will pivot further down the line, especially as market turbulence and cycles make it harder to be a pure play and have nothing else to show for. Whereas for K33, we're embracing that upfront. We're anticipating the next phase, and we're building a business in combination with a treasury strategy that will enable us to ride the cycles. I mean, I've been in Bitcoin since 2013. I know that there can be 80% drawdowns.
Although that type of deep drawdowns are less likely for each cycle, they cannot be ruled out. You really have to build, or I think that you really have to build a business that can withstand that and have an operational side in addition to the accumulation side. Because otherwise, you will find yourself as a forced seller at the bottom, and you do not want to be that player.
Yeah. That makes sense. We had two more questions. Just a reminder, you can ask more questions through the Q and A option. On the transaction specifically, will 100% of the proceeds go toward buying more BTC or add on?
Yeah. We have the team we need. We have the financing we need for the operation. We have the tech. I mean, the tech platform is already ready for the capabilities that I described of mirroring out other venues.
There's no big investments needed for K33 to scale. What we need is the strong balance sheet, and that means that one-to-one, the net proceeds will be allocated to Bitcoin from this round and future rounds as well.
On the transaction as well, it's one question on the dilutive effect of the transaction. Do you want to touch on pricing and transaction?
Yeah, absolutely. We've set this transaction at market. What is important to a shareholder is to ask whether the company will be worth more after we raise the cash and bought Bitcoin or less. I strongly believe that we are worth more. That means that the dilutive effect of printing more shares is less negative than the value-creating effect of having the stronger balance sheet, being exposed to Bitcoin, and unlocking the operational synergies.
An important thing here is that if I were raising this type of money to try to build a Coinbase competitor, trying to build all of that from scratch, then it would be massive execution risk. Then it would be massive risk that I would kind of burn all of that money on bad hires, not getting it off the ground, not solving it. That would be highly risky. That is not what we are doing. We are doing something very simple, very clean without that execution risk. We are going to buy Bitcoin. Every dollar that comes in, every euro, every SEK, every NOK that comes in, will go to buy Bitcoin. It is just a value exchange, and I clearly view this as accredited to our investors. Otherwise, we would not have launched the deal.
Thank you. It is a question on just looking ahead.
The comment is that you'll probably not be able to raise enough cash to buy 1,000 BTCs in this round. What's the plan going forward on raising more capital to be able to acquire the remaining BTCs to reach that target of 1,000 Bitcoins?
We are aware of the full playbook, be it convertible loans, being other structures, future equity issues. We'll see how this round goes. I'm very optimistic. I think it'll be very value-adding to K33. I've personally subscribed in the round to participate. Based on the result of this, we will, together with the board, decide on what's the best approach forward, what's the best next step. We'll always look at our current shareholders at that point in time and ask ourselves, how can we maximize that shareholder value? How can we find the right terms to accumulate the Bitcoins?
The goal is not only to get the Bitcoins at terrible terms. I could do that, but I want to do it in a way that is maximizing shareholder value. I'm confident that we'll be able to get to our target of 1,000 Bitcoin over time.
Yeah. That makes sense to me, at least. Just to follow up on one of your previous answers, you commented that you'll benefit with time and with scale. When you're able to accumulate more Bitcoins, that will result in more platform-wide benefits, right? Scale is key here. That was one comment. Why, from an investor perspective, should you now choose K33 before you've been able to reach significant scale in terms of accumulation strategy compared to the past?
Because when you reach significant scale, it will be worth 10x more.
There you go.
That's the whole thing.
That's the whole point of like, you had the same for Bitcoin, right? If you came in in 2013, your return would have been unheld all the way to now. Your return would have been insane. It was more volatile. It was more risky. It was earlier. The momentum was not as big. I believe that K33 has proven itself with six consecutive quarters of growth. We already have raised $6 million from our key shareholders. We are now guaranteed $8.5 million as the absolute minimum in this round. It is not like we are sitting here without Bitcoin. Of course, if you want to see us having the 1,000 Bitcoins before you jump in, that is fine. You will lose out of a lot of the upside opportunity. That also comes with higher risk, for sure. That is finance.
Yeah. Thank you.
I think that sums it up, and that's loud and clear. Thank you for taking the time. Yeah, thank you.
Thank you so much. Have a great day, everyone. Have a great day, everyone.
Thank you.