Key Points
- The October Bitcoin crash has hammered companies that hold large crypto treasuries.
- Strategy’s stock has fallen about 40%, but many of its “copycat” companies have dropped over 60%.
- Many of these firms are now worth less than the crypto they hold, a major red flag for investors.
- Dozens of companies are sitting on unrealized losses after buying Bitcoin at higher prices.
The corporate trend of hoarding Bitcoin is facing a harsh reality check. After riding high earlier this year, dozens of “digital asset treasury” companies are now reeling from the sharp October crypto crash. While Pioneer Strategy (formerly MicroStrategy) has seen its stock fall, the many firms that copied its playbook are getting hit even worse.
The sell-off has been brutal. Stocks in companies such as Eric Trump’s American Bitcoin and Anthony Pompliano’s ProCap Financial have plummeted by 60% or more. Investors are punishing a business model that has proven highly sensitive to crypto’s volatility
A key focus for these firms is the mNAV ratio, which measures their market value relative to the value of the crypto they hold. When it drops below 1, it indicates investors believe the company is worth less than the Bitcoin on its balance sheet.
Worse, dozens of these companies bought Bitcoin at prices higher than today’s, leaving them sitting on massive unrealized losses. Experts are now predicting a “Darwinian phase” for the sector, likening it to the dot-com bubble, when many companies with flawed business models went bust.
“I think you’ll see a lot of the DATs become irrelevant,” said one investor. The survivors will likely be those who have a real, cash-generating business in addition to their crypto holdings.
Even the original player, Strategy, is feeling the heat. To calm nervous investors, the company recently announced a $1.44 billion cash reserve to cover its expenses. But for the many imitators who jumped in during the good times, the path forward is much less certain. As one analyst put it, “the bar appears to be higher now.”
