According to New York Digital Investment Group (NYDIG), the premiums of crypto treasury firms are steadily declining, which may lead to a worsening situation without corrective actions from the companies.
Overview of the Situation
Greg Cipolaro, NYDIG's global head of research, notes that major Bitcoin-buying firms such as Metaplanet and Strategy are seeing their stock prices compress against their net asset values (NAV) despite the recent Bitcoin rally. Cipolaro points to a variety of factors impacting this compression, including investor anxiety over upcoming supply unlocks, shifting corporate strategies, increased share issuance, profit-taking, and limited differentiation among treasury strategies.
Support Through Stock Buybacks
Cipolaro warns that crypto treasury firms may face a 'bumpy ride' ahead, as many await mergers or financing rounds to go public. This could trigger a 'substantial wave of selling' by shareholders once lock-up periods expire. He stated that if shares in a treasury company traded below its NAV, the most straightforward course of action would be stock buybacks, which help raise share prices by reducing supply and reinforcing investor confidence. 'If we were to give one piece of advice to DATs, it’s to save some of the funds raised aside to support shares via buybacks,' he added.
Dynamics of Bitcoin Holdings
Despite these challenges, Bitcoin holdings among treasury companies have hit record highs this year. A CryptoQuant report shows that these firms collectively hold 840,000 BTC, with Strategy accounting for 76%, or 637,000 BTC. However, while the number of purchases per month has increased, the total volume of Bitcoin acquired has slowed. In August, the total amount of Bitcoin bought fell below the yearly monthly average, with firms making fewer purchases per transaction. Strategy’s average Bitcoin purchase size dropped to 1,200 BTC from its March peak of 14,000 BTC. Similarly, other firms saw an 86% decline from their peak of 2,400 BTC.
In summary, the declining premiums and slowing growth of Bitcoin holdings among crypto treasury firms pose significant challenges for the sector that require careful monitoring and possible measures from the companies.
