Written by: Cheshire Capital
Compiled by: Dingdang, Planet Daily
Editor's Note: In recent months, BTC treasury companies have been seen as important drivers of the crypto market and strong pillars supporting Bitcoin prices. However, the reality may be far less solid than imagined. When price volatility combines with shareholder pressure, even treasury companies can instantly turn from 'guardians' to 'sellers.' This article attempts to project the market path that BTC treasury companies may encounter in the next 6-12 months. Core assumption:
Entities: 10 BTC treasury companies holding varying amounts of Bitcoin, with market net asset value multiples (mNAV) ranging from 1.0x to 5.0x.
Differences: The quality of the company is determined by the size of the treasury and the management's beliefs/marketing capabilities.
Background: The initial price of Bitcoin was $120,000.
Core logic: Once some companies choose to sell BTC to buy back shares, it will trigger a reflexive cycle: price drop → mNAV under pressure → more companies forced to sell → sell-off intensifies → price further declines.
Original text as follows
Assuming there are 10 BTC treasury companies holding Bitcoin, and they have different trading premiums (mNAV multiples) in the secondary market, ranging from 1.0x to 5.0x. At this time, the BTC price is $120,000. Their quality varies, with 'quality' depending on the size of the treasury and the management's beliefs and marketing capabilities.
Some low-quality BTC treasury companies are the first to fall below 1.0x mNAV. For teams lacking firm beliefs, the most reasonable action is to sell some Bitcoin to buy back shares. After all, in the short term, this can bring a net asset value enhancement effect per share. Note that these companies sold some BTC at the price of $120,000.
Due to the aforementioned sell-off, the Bitcoin price falls back to $115,000 (the price here is mainly used to illustrate the scenario). Some other treasury companies (including those that had already done buybacks) continue to see their mNAV drop due to the highly correlated Beta effect with BTC. Therefore, another 4-5 companies sell Bitcoin to buy back shares at the price of $115,000.
The market gradually realizes that among the ten companies, probably eight or nine care more about short-term shareholder defense rather than long-term BTC accumulation. Investors begin to anticipate that if these companies collectively need to sell 30% to 50% of their holdings, the results would be disastrous. After all, even MSTR dropped to 0.5 times its valuation level during the lows of 2022. Thus, BTC is quickly repriced to $100,000, and most treasury companies also fall below 1.0x.
Some medium-quality treasury companies, previously hesitant, begin to feel pressure from both the market and shareholders, forced to maintain mNAV, thus joining the sell-off. At this point, the market sees about $500 million to $1 billion in Bitcoin sell orders each week. Even high-quality companies (like MSTR, 3350, XXI) find it difficult to defend as BTC drops to about 1.2x. BTC falls to $90,000.
The entire treasury company system, including high-quality players, has now fallen below 1.0x. MSTR preferred shares have dropped to below $0.70 against a $1 par value, and there are even rumors that Saylor is considering suspending dividends. Some companies previously considered strong holders (like 3350, XXI) also start selling Bitcoin to cover operating costs. BTC drops to $80,000.
By this time, most low-quality treasury companies have almost emptied their BTC treasuries. Early 'bottom fishers' begin to enter the market, but the cruel aspect of reflexivity is that sell-offs will spread up the quality chain, further amplifying scale and speed. As medium to high-quality companies also surrender, the largest Bitcoin holdings begin to enter the market, with weekly selling pressure reaching as high as $1.5 billion to $3 billion.
It should be noted that, apart from MSTR, BTC treasury companies collectively hold about 350,000 Bitcoins, worth approximately $40 billion at current prices. This kind of sell-off could last a long time, and if MSTR is also forced to participate, it would be even more brutal, with BTC possibly dropping to $70,000.
Possible outcomes
The lowest quality companies actually benefit. Because they were forced to sell BTC early, they avoided lower prices. The problem is, once sold, the company ceases to be a 'iterative BTC treasury' and instead becomes a 'one-time valuation play.' Even selling just once will damage its reputation as a 'diamond hand treasury company,' significantly reducing future capital inflows.
If one believes that BTC still has a 30-40% annual compound growth rate (I believe!), then companies that hold on will ultimately be fine. As of now, I believe only Saylor will do everything possible to hold onto BTC, but there may also be other candidates (like 3350, NAKA). However, until most of the sell-off is complete, no treasury company is worth a long-term bullish outlook.
Centrists are the worst off. They are neither radical 'sharks' nor do they have enough faith. In the aforementioned scenario, such companies (like MARA, RIOT, SMLR) would sell off in stages (6 to 7), with an average selling price of about $75,000.
This logic also applies to treasury companies of other assets, but ETH may be an exception. Because ETH treasury companies have an oligopolistic structure: BMNR and SBET hold about 75% of the treasury ETH (if including DYNX and BTBT, the proportion reaches 90%). This allows them to potentially form some kind of coordination or 'collusion' to avoid the vicious cycle of competing sell-offs. Although the likelihood of maintaining such an agreement is low, the success probability increases under higher concentration of holdings.
Comparable to the traditional finance Archegos incident where banks acted aggressively. Radical banks (like Goldman Sachs, Deutsche Bank) cleared their positions first, resulting in far better outcomes than those slow-moving players (Credit Suisse, Nomura) who tried to coordinate an exit.
Note: The target price for BTC here is not $70,000; the prices in the text are used solely for scenario illustration.
