Bitcoin treasuries have been in a slump for months. More than 60% are sitting in unrealised losses from their last Bitcoin buys. The days of diluting shareholders to buy crypto and call it a business model are over. There’s only one way to turn things around, says Mike Novogratz, CEO of Galaxy Digital, who argues the treasuries not named Strategy or BitMine must transform into companies with real products and services.
Nearly 40% of Bitcoin treasuries trade below the value of their crypto holdings. More than 60% bought Bitcoin at a price well above its current level. Ethereum treasuries have also all but ended their shopping sprees. Only Tom Lee’s BitMine continues to buy Ether every week, and it has amassed more than 50% of all Ether held in the $21 billion sector.
To Novogratz, the model that worked for Strategy, BitMine, and to some extent Joe Lubin doesn’t work for anyone else. They can either transform into more conventional businesses with revenue models — abandoning their pure-play treasury marketing ploy — or die slowly as discount vehicles trading at 70 to 80 cents on the dollar. The price of Ethereum is trading at the same as it was in 2021. If he were running a distressed treasury, Novogratz said he would buy back discounted stock to narrow the spread between that stock and the net asset value, and seek ideas that leverage his firm’s talent.
NAV stands for net-asset-value. It tracks how much equity value investors pay for every dollar of crypto held. When the equity is above $1, it trades at a premium; when it’s below, it trades at a discount. Today, roughly half of the Bitcoin treasury space trades at a discount, and ETFs offering direct exposure have reduced the appeal of treasury wrappers.
Leave a Reply