The current decline in Bitcoin is not good news for Digital Asset Treasuries (DATs) specializing in accumulating the most iconic cryptocurrency. This reality has even prompted the CEO of industry leader Strategy to consider selling some of his BTC to pay dividends to shareholders.
Strategy has nothing to do with a “hyper-dilutive Ponzi scheme”
The current decline in the cryptocurrency market is imposing a real-life stress test on the Digital Asset Treasuries (DAT) sector, which has seen unprecedented growth since the beginning of the year.
Indeed, these publicly traded companies, which have become specialists in crypto accumulation—with sometimes (very) shaky financial arrangements—find themselves in a very difficult position with shareholders seeking increased returns through supposedly attractive per-share holding ratios (mNAV).
However, Phong Le, CEO of the leading company Strategy, sought to reassure listeners during a recent appearance on the podcast What did Bitcoin. He explained how his company, with its current stock of 648,870 BTC, has nothing to do with the “hyper-dilutive Ponzi scheme” conjured up by the “mental gymnastics” of certain observers.
Just as we introduced people to Bitcoin-backed debt, we are now introducing them to Bitcoin-backed credit, and we are only just getting started. I think that, in the foreseeable future, we are still talking about 40% to 50% annualized returns over a period of four or five years.
Phong Le
Could this be a way to reassure investors, given the significant decline in MSTR’s share price of almost 60% since its peak last July? The question arises, especially given the prospect of its possible exclusion from the Nasdaq 100 and MSCI USA indices at the beginning of next year.
Selling Bitcoin to pay dividends
This delicate situation has been greatly exacerbated by the current decline in the price of BTC, which fell back below $90,000 at the start of this week. This raises the question once again of whether Strategy might start selling Bitcoin, despite Michael Saylor’s recent denial.
According to Phong Le, this scenario now seems very clearly possible, but only as a last resort.
We can sell Bitcoin and we would do so if we had to finance dividends when the mNAV falls below 1x. It would be a last resort: mathematically correct, but narratively delicate.
Phong Le
The problem? This mNAV value has already been below 1x since November 12, according to data from the Strategy Tracker website. That is, almost exactly when suspicions of BTC sales appeared on the networks, following a series of transfers made by Strategy.
As Phong Le is quick to point out, the official announcement of a Bitcoin sale could have a significant psychological impact on the market. However, he seeks to reassure investors by explaining that “if Bitcoin outperforms the S&P 500, Strategy wins.”
New problem: BTC is down 10% over the past year, compared to a 13% increase for the S&P 500.
