Crypto is currently riding the wave of corporate treasuries. This acceleration has given rise to a number of projects of varying degrees of solidity. But according to this long-standing player in the ecosystem, most will fail.
Corporate crypto treasuries: the new paradigm
It is impossible to ignore the unprecedented wave of corporate treasury projects based on Bitcoin accumulation. Just look at the number of companies applying for this development model, which was still marginal just a few months ago.
A tally was compiled by members of Breed VC, founded by Jed Breed, a veteran of the crypto ecosystem. The exercise is proving difficult, given the growing amount of funds involved, but Breed’s June 2 tally shows 199 entities collectively holding $315 billion in BTC.
Unsurprisingly, the undisputed leader in the Strategy sector is dominating, with a strategy classified by Breed VC analysts as a “Bitcoin holding company.” These are companies whose primary objective is to accumulate more and more Bitcoin.
Companies that simply add BTC to their balance sheets while continuing to focus on their core businesses will be valued primarily based on those core operations. The dynamic changes when a company’s sole purpose becomes holding BTC — effectively choosing to be valued based on the Bitcoin it holds.
Breed.vc
Bitcoin cash vs MNAV
A small difference in appearance that changes the entire equation, because in the case of these Bitcoin holding companies, it quickly becomes imperative to outperform Bitcoin. Otherwise, why wouldn’t investors just hold BTC themselves?
This is where the Multiple on Net Asset Value (MNAV) principle comes into play. The goal? To increase the amount of BTC held per share by any means possible—raising capital, issuing debt, or reinvesting—in order to guarantee a higher return than Bitcoin.
The market does not assign MNAV to a company simply because it owns Bitcoin. It does so when investors believe that this strategy can reliably increase the BTC/share ratio faster than they could on their own.
Breed.vc
“Nothing in finance is bulletproof, especially Bitcoin cash companies.”
Yet the current hype surrounding these Bitcoin corporate treasuries is already giving way to legitimate doubts expressed by many observers. One need only recall the very delicate situation of Strategy, when Bitcoin fell 80% between 2022 and 2023.
It was a stress test that Michael Saylor, now considered a genius among Bitcoin investors, passed with flying colors. But “the existential threat of a prolonged bear market eroding the MNAV premium at a time when significant debt maturities are due” cannot be dismissed after a single seasonal success.
Indeed, the specter of contagion looms large and cannot be ignored in the event of a break in the MNAV premium. Once crossed, this threshold could trigger the need to liquidate BTC in order to meet the obligations of the companies concerned, to the point of setting off a death spiral of price declines leading to further forced sales.
A very clear warning from Breed VC analysts, particularly in light of the massive influx of corporate crypto treasuries, which are based on tokens that are much more unstable and volatile than BTC. As a result, they believe that most of these projects are simply doomed to failure, with a risk of contagion equivalent to exposure to the principle of debt.
The rule is simple and unequivocal: only companies capable of maintaining a positive and sustainable MNAV premium will succeed. Strategy seems to be on this VIP list, given its size, reputation, and success.
However, its many imitators could well pay the price for their lack of charisma during a bear market. Not to mention an essential question that is often overlooked in this type of assessment: the potential negative consequences for Bitcoin.
