Crypto Stocks Decline as Bitcoin Treasury Strategies Face Scrutiny
Crypto stocks, particularly those linked to bitcoin treasuries, experienced declines on Friday. Key companies like MSTR and SMLR fell around 6%, while Japan-listed Metaplanet dropped 24%. Bitcoin itself only decreased slightly by over 2%.
The downturn coincides with discussions on social media regarding the sustainability of Michael Saylor's bitcoin accumulation strategy. Critics argue that the financial tactics used by companies like MSTR rely heavily on mNAV (market valuation compared to net asset value). Maintaining an mNAV above 1.0 is crucial for these firms to continue raising capital and acquiring more bitcoin.
Key points include:
- If mNAV falls below 1.0, it indicates the company's value is less than its bitcoin holdings, complicating capital raising efforts.
- This situation mirrors past events with Grayscale's bitcoin trust (GBTC), which traded at a premium during bullish markets but faced discounts as prices dropped, contributing to significant market disruptions.
- Investors are wary of how much more bitcoin these treasury firms will accumulate and the potential for them to experience failures similar to past market collapses.
Responses from proponents of MSTR suggest that if mNAV falls, they could liquidate bitcoin to buy back shares, thus potentially benefiting shareholders.