Only a few Bitcoin treasury companies will stand the test of time and avoid the vicious "death spiral" that will impact BTC holding companies that trade close to net asset value (NAV), a business entity's total assets minus its liabilities, according to a report from venture capital (VC) firm Breed .
The health of Bitcoin treasury companies hinges on their ability to command a multiple of their net asset value (MNAV), the authors wrote . Breed's report outlined the seven phases of a BTC treasury company's decline, which begins with a drop in Bitcoin's price that triggers a decline in MNAV, bringing a company's share price close to its actual NAV .
This, in turn, makes it harder for BTC holding companies to secure the debt and equity financing critical to the asymmetric trade of converting the inflationary US dollar into a supply-capped appreciating asset . As access to credit dries up and debt maturity looms, margin calls are triggered, forcing the firms to sell BTC into the market, lowering the price of BTC further, causing a consolidation of holding companies acquired by stronger firms, and potentially triggering a prolonged market-wide downturn .
The authors of the report wrote: "Ultimately, only a select few companies will sustain a lasting MNAV premium. They will earn it through strong leadership, disciplined execution, savvy marketing, and distinctive strategies that continue to grow Bitcoin-per-share regardless of broader market fluctuations."
This death spiral could trigger the next crypto bear market. However, the authors of the report said that since most BTC treasury companies currently finance their purchases with equity rather than debt, the implosion may be contained .
Meanwhile, a DWF Ventures report reveals that public companies have boosted their crypto treasury holdings by 100% to $76 billion . The report identifies 14 companies that have rolled out a crypto investment strategy, and who collectively now hold digital assets worth $76B . Aside from the Michael Saylor-led Strategy with its $67B investment, DWF Ventures cites public companies such as Trump Media, GameStop, Metaplanet, Tesla, and Semler Scientific .