The corporate strategy of holding vast Bitcoin reserves is facing a critical test as Strategy, a leading proponent, sees its market net asset value (mNAV) premium collapse to its lowest point since February 2024. This significant narrowing of the gap between its market capitalization and its underlying Bitcoin assets signals potential instability for the company and the broader digital asset treasury model.
Strategy’s Shrinking Premium
Strategy’s mNAV, a crucial metric reflecting the market’s valuation of its shares relative to its Bitcoin holdings, recently plummeted to 1.174. This marks a nearly two-year low and coincides with a 3% drop in the company’s share price, reducing its market cap to $88.4 billion. As the 121st-largest U.S. public company, Strategy currently holds an impressive 640,031 BTC, valued at approximately $75.4 billion. This shrinking premium highlights a core challenge to the sustainability of companies whose primary value proposition is their Bitcoin treasury, making it harder to justify their market capitalization.
The Pressures Undermining the Model
The erosion of Strategy’s mNAV is driven by a combination of factors, particularly the mechanics of PIPE (Private Investment in Public Equity) financing. These structures allowed early investors to acquire shares at substantial discounts, often with registration rights that permit public sales after lockup periods expire. Once these periods end, a wave of selling pressure can be unleashed, pushing down share prices and compressing the premium to the underlying Bitcoin. This creates a challenging feedback loop: as premiums fall, companies like Strategy struggle to issue new equity at attractive prices to fund further Bitcoin acquisitions, jeopardizing their growth strategy.
Broader Implications and Risks
The long-term implications of a sustained decline in mNAV are severe. Industry experts warn that maintaining an mNAV above 1.0 is vital for these companies to expand their holdings and ensure financial health. Should Strategy or similar firms trade below this threshold for extended periods, they face the grim prospect of a "death spiral." In such a scenario, the inability to raise capital could force asset sales to service debt or fund operations, which in turn would exert downward pressure on Bitcoin prices, leading to further market corrections. Strategy’s current predicament serves as a critical warning for the entire digital asset treasury movement it pioneered.
