Bitcoin treasury companies, representing a new category of players in the market, are facing extinction threats, according to a report from the venture capital firm Breed. The drop in Bitcoin prices undermines their financial stability, leading to a dangerous scenario.
Issues Related to NAV
The heart of the problem lies in the accounting mechanism known as Net Asset Value (NAV). When the price of Bitcoin falls, the structure of treasury companies wobbles. Their NAV multiple (MNAV) collapses, making it difficult to raise new capital and leading to panic sales of BTC.
Discipline and Survival Strategies
Not all companies are vulnerable to this crisis. Breed identifies companies that are able to adapt through strong leadership, coherent strategy, and prudent management of the Bitcoin/share ratio. This approach allows them to stay afloat even amidst market instability.
Systemic Risks of the Company
Breed's report highlights that most Bitcoin treasury companies finance their purchases through equity capital, limiting the risk of contagion throughout the market. However, if they start to rely on debt financing, this could trigger the next crash in the crypto industry.
The era of Bitcoin treasury companies is facing critical challenges. Simply holding BTC is no longer enough; companies need to find a strategic approach to their assets. In the world of Bitcoin, survival is for those who can adapt to market changes.
