The current decline in Bitcoin is not good news for Digital Asset Treasuries (DAT), which specialize in accumulating the most iconic cryptocurrency. This reality is even prompting the CEO of industry leader Strategy to consider selling a portion of its BTC to pay dividends to its shareholders.
Strategy has nothing to do with a “hyper-dilutive Ponzi scheme”
The current downturn in the cryptocurrency market is putting the Digital Asset Treasuries (DAT) sector through a real-life stress test, a sector that has seen unprecedented growth since the start of the year.
Indeed, these publicly traded companies—which have become specialists in crypto accumulation, often with (very) shaky financial structures—find themselves in a very precarious position as shareholders seek higher returns based on supposedly attractive net asset value per share (mNAV) ratios.
However, Strategy CEO Phong Le sought to reassure listeners during a recent appearance on the “What Did Bitcoin” podcast. He explained how his company—and its current holdings of 648,870 BTC—have 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’re just getting started. I think that, in the foreseeable future, we’re still talking about 40% to 50% annualized returns over a period of 4 or 5 years.
Phong Le
Could this be a way to reassure investors, given the significant drop in its MSTR stock price of nearly 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 early next year.
Strategy’s MSTR stock has seen a significant decline in recent months
Selling Bitcoin to pay dividends
A delicate situation largely accelerated by the current drop in the price of BTC, which has fallen 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.
A scenario that now appears very clearly as a possibility, according to Phong Le, 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 sound, but narratively tricky.
Phong Le
The problem? This mNAV value has already been below the 1x level since November 12, according to data from the Strategy Tracker website. That is, almost exactly when suspicions of BTC sales began circulating on social media, following a series of transfers made by Strategy.
Strategy’s mNAV is trading below the 1x level
As Phong Le is quick to point out, an official announcement of a Bitcoin sell-off could have a significant psychological impact on the market. He seeks to reassure, however, by explaining that “if Bitcoin outperforms the S&P 500, Strategy wins.”
Another issue: BTC is down 10% over the past year, compared to a 13% gain for the S&P 500.
