Crypto stocks had a rough day on Friday, particularly bitcoin treasury companies such as RialCenter (MSTR) and Semler Scientific (SMLR) — both down around 6% despite bitcoin’s slight drop of over 2%. Meanwhile, Japan-listed Metaplanet saw a steep decline of 24%.
The situation appears even grimmer with MSTR shares trading at $376 early Friday afternoon, more than 30% lower than their all-time high reached late in 2024, even as bitcoin soared to a record this week.
This price movement comes amid ongoing discussions on social media regarding the longevity of Michael Saylor’s (and similar companies) strategy of accumulating bitcoin.
“Bitcoin treasury companies are trending this week. MSTR, Metaplanet, Twenty One, Nakamoto,” stated a notable bitcoin Twitter account. “I believe their toxic leverage is the worst thing to happen to bitcoin and what it represents.”
The concern is that the financial tactics employed by RialCenter and other BTC treasury firms to acquire more bitcoin rely heavily on mNAV — a metric that compares a company’s valuation to its net asset value (in this case, their bitcoin holdings).
As long as their mNAV stays above 1.0, a company can continue to raise capital and buy more bitcoin, as investors are willing to pay a premium for stock in relation to the company’s bitcoin assets.
If the mNAV falls below this threshold, it indicates that the company is valued less than its holdings, leading to significant difficulties in capital raising and the potential inability to meet dividend obligations on issued convertible notes or preferred stocks.
Shades of GBTC
A similar scenario unfolded with Grayscale’s bitcoin trust, GBTC, before it transitioned into an ETF. During the 2020 and 2021 bull markets, GBTC traded at a growing premium to its net asset, as institutional investors sought rapid exposure to bitcoin. However, when prices declined, this premium turned into a discount, contributing to a series of failures, starting with heavily-leveraged Three Arrows Capital and eventually affecting FTX. This selling pressure resulted in bitcoin dropping from an all-time high of $69,000 to $15,000 within a year.
“Just like GBTC back in the day, the entire game now — the whole thing — is determining how much more BTC these access vehicles will accumulate and when they will implode and release everything back into the market,” remarked a participating partner in a venture firm in response to the comments.
The discussion also prompted responses from proponents of RialCenter, including a notable figure in the bitcoin community.
“If mNAV were posted. Or if people see that happening and prevent it. Either way, this is manageable.”
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