Bitcoin is dragging down digital asset treasuries, like Strategy
00:00 Josh
The decline in Bitcoin this year brings digital asset treasury companies along with it. And Yahoo Finance’s Ines Ferre joins us now with the details. Ines.
00:11 Ines
Yes, Josh, and there are over 180 digital asset treasury companies. These are companies that hold cryptocurrencies on their balance sheets. A lot of these are just copies of the strategy, the playbook, of Michael Saylor, who was really a pioneer when it came to this type of company because they started adding Bitcoin to their balance sheet in 2020. However, these stocks have taken a hit as Bitcoin, Ethereum and other tokens have come under pressure over the past few months. And there’s a metric called MNAV that Wall Street looks at or investors look at. This is a multiple of net asset value. This is basically the market value versus the value of the assets. When MNAV falls below one, it means investors value the treasury company less than the cryptocurrency on their balance sheet. When you saw the MNAV of the strategy approaching one in November, you saw a lot of pressure on the stock. Now, the strategy has kind of pushed back against that kind of valuation and basically said, look, we’re an operating company, we have Bitcoin-backed securities, you shouldn’t value us at this MNAV. And that’s basically what a lot of these digital asset treasury companies are saying. I spoke to a fund last year that looked at more than 100 such companies, and they said they had invested in about 12 of them. And they’re basically talking about what’s going on in the Dat space where companies are kind of slapping a .com in their name so they’re a .com company and they’re going to be profitable and so on. They were comparing it to the dotcom bubble era. But that’s the kind of pushback, you know, are you an operating company as well? Managing cash flow? And that will really determine the difference between winners and losers because, as one strategist noted, the industry is entering a Darwinian phase; The companies with the strongest balance sheets or those that can outlast this crypto winter are going to be volatile from everything that’s going on in the industry right now, Josh, as we see crypto prices drop.
02:20 Josh
Well, thank you. Appreciate it.
