Crypto stocks took a hit on Friday. Bitcoin treasury companies, like Strategy (MSTR) and Semler Scientific (SMLR), saw their shares drop about 6%. This happened even as Bitcoin itself only slipped a little more than 2%. Japan’s Metaplanet, another company holding a lot of Bitcoin, fell even harder, down 24%.
- Bitcoin treasury companies saw their stock prices fall even as Bitcoin’s price remained relatively stable. This raised questions about the sustainability of their strategies.
- The market is debating whether the strategy of accumulating Bitcoin is sustainable, especially given that some companies’ market values are below the value of their Bitcoin holdings.
- Experts are discussing the risks associated with these companies, including the potential for financial difficulties if their market value falls below the value of their Bitcoin.
It gets a bit more interesting when you look at the bigger picture. MSTR shares, trading around $376 on Friday, are actually more than 30% below their highest point from late 2024. This is a curious thing, isn’t it? Bitcoin, the very asset they hold, just pumped to a new record this week.
This price action has stirred up quite a debate on social media. People are asking tough questions about whether Michael Saylor’s strategy—and those who copied him—of vacuuming up Bitcoin is really sustainable. It’s a bit like watching someone try to fill a swimming pool with a teacup; you wonder how long they can keep it up.
One person, a well-known Bitcoin Twitter poster named lowstrife, didn’t hold back. They said, “Bitcoin treasury companies are all the rage this week. MSTR, Metaplanet, Twenty One, Nakamoto.” They then added, rather bluntly, “I think they’re toxic leverage is the worst thing which has ever happened to bitcoin [and] what bitcoin stands for.”
Bitcoin treasury companies are all the rage this week. MSTR, Metaplanet, Twenty One, Nakamoto. I think they're toxic leverage is the worst thing which has ever happened to bitcoin & what bitcoin stands for.
https://x.com/lowstrife/status/1925717037915005357
The core of the problem, according to lowstrife, lies in something called mNAV. This is a metric that compares a company’s market value to its net asset value, which, for these firms, is mostly their Bitcoin holdings. It’s a bit like checking if your car is worth more than the sum of its parts.
As long as a company’s mNAV stays above 1.0, it means investors are willing to pay a premium for the stock compared to the company’s Bitcoin. This lets the company keep raising capital and buying more Bitcoin. It’s a nice cycle, right? More money, more Bitcoin.
But if that mNAV dips below 1.0, things get tricky. It means the company’s value is actually less than the value of its Bitcoin. This can make it very hard for them to raise more money. It could also cause problems when they need to pay out on things like convertible notes (a type of loan that can turn into stock) or preferred stock (shares that pay a fixed dividend).
This whole situation brings to mind something similar that happened with Grayscale’s Bitcoin Trust, known as GBTC. Before it became an ETF (exchange-traded fund), GBTC was a closed-end fund. During the bull market of 2020 and 2021, it traded at a growing premium. Everyone wanted a piece of Bitcoin, and GBTC offered a quick way in for big investors.
Then, when prices turned south, that premium vanished. It became a huge discount instead. This contributed to a series of market collapses, starting with highly-leveraged Three Arrows Capital and eventually reaching FTX. The selling pressure that followed pushed Bitcoin from its record high of $69,000 all the way down to $15,000 in just one year. It was a rough ride, to say the least.
Nic Carter, a partner at Castle Island Ventures, responded to lowstrife’s thread. He put it pretty plainly: “Just like GBTC back in the day, the entire game now — the whole thing — is figuring out how much more BTC these access vehicles will scoop up, and when they will blow up and spit it all back out again.” It sounds a bit like a ticking clock, doesn’t it?
Just like GBTC back in the day, the entire game now — the whole thing — is figuring out how much more BTC these access vehicles will scoop up, and when they will blow up and spit it all back out again.
https://x.com/nic__carter/status/1925878569281917245
Of course, not everyone agrees with this gloomy outlook. MSTR supporters chimed in, including Adam Back, a Bitcoin original and CEO of Blockstream. He offered a different perspective, suggesting that if mNAV does fall below 1.0, these companies could simply sell some Bitcoin and buy back their own shares. This would increase the amount of Bitcoin per share, which is good for shareholders.
Back also suggested that people might see this coming and prevent the mNAV from dropping too low in the first place. He concluded his thought with a simple, “Either way this is fine.” It’s a confident stance, isn’t it? The debate continues, with strong opinions on both sides, as the market watches closely.
If mNAV < 1.0 they can sell BTC and buy back MSTR and increase BTC/share that way, which is in share-holder interests. Or people see that coming and don't let it go there. Either way this is fine.
https://x.com/adam3us/status/1925820140198769039
