Bitcoin treasury firms are having a harder time than their underlying asset in Q4, as the once magic dust of “pivoting to bitcoin” wears thin.

The price of bitcoin has dropped from the $118,500 level at the beginning of October to below $101,300 as of Thursday morning, a 14.5% decrease. 

In comparison, Strategy, Metaplanet, and Twenty One Capital — three of the top four bitcoin digital asset treasuries (DATs), holding a cumulative 716,029 tokens worth $73.3 billion — have seen each of their shares drop about 30% and 35% in the period, data from blockchain analytics firm Artemis shows.

Meanwhile, Nakamoto-merged KindlyMD has slumped 43%, while Strive Inc. has slid 50% in the same time frame.

The price decline comes as Strategy, the first public company to stockpile bitcoin in 2020, and other treasury firms have seen their basic mNAV dip below 1. This means the market price of a company’s shares is less than the total value of its bitcoin holdings. The last time Strategy’s mNAV was under 1 occurred in January 2024, per Blockworks Research. 

When the wind turns

The sentiment surrounding bitcoin treasury firms “is just horrible,” according to Kevin Li, a research analyst at investment firm ParaFi Capital. “Markets are volatile, and bitcoin hasn’t been going up.” 

Omer Goldberg, the founder and CEO of risk management firm Chaos Labs, said, “Every flywheel can become a death spiral when the wind turns the other way.” 

“Some bitcoin/crypto treasury firms are mobilizing their underlying to peg the stocks at 1 mNAV: this will set their path for their shrinking to zero capitalization; at the same time with no certainty on 1 mNAV enforcement, there is no reason why the stocks should stop here,” Goldberg told Sherwood News. 

Le Shi, managing director at crypto trading firm Auros, outlined different scenarios that will likely play out over the coming months, with several bitcoin DATs now trading at a 1 or lower mNAV.

If bitcoin’s price strengthens, the mNAVs of treasury firms will rebound as doubts about their ability to service debt obligations dissipate. If the price of bitcoin weakens, some DATs with stronger balance sheets may initiate stock buybacks to boost confidence, while other DATs trading at discounts may become targets for mergers or acquisitions. 

If the markets stay stagnant, consolidation among DATs is “likely to become a recurring theme for the sector, with some even being forced to divest their assets to repay debts and subsequently, become targets for acquisition,” Shi said.

Bitcoin is the safest, but still limited 

Jaewon Kim at blockchain research firm Four Pillars added that bitcoin DATs are structurally limited by what the asset can do: even though BTC is the safest and most in-demand asset for institutions, it’s not programmable money from a treasury operator perspective.

“For a DAT, that matters because a major path to push mNAV > 1 is to generate incremental return on assets,” Kim said. Premiums are justified when tokens enable treasuries to use their holdings to earn on-chain income through staking, liquidity provisioning, and earning protocol fees, Kim told Sherwood. 

“Bitcoin treasuries have limited flexibility… Unless the company has a very strong brand, a unique narrative (like [Strategy cofounder Michael] Saylor), or a business vision built around BTC, I think it’s only natural the structure naturally gravitates toward NAV,” Kim argued.

Despite the current climate, Paradigm’s Li, who began investing in Strategy last year and holds about 30% of his portfolio in the firm, recently bought more shares at $240 each.

Strategy having an mNAV under 1 doesn’t impact Li’s investment thesis, which relies on Strategy being able to increase bitcoin per share by issuing preferred equity to “capture the spread between BTC CAGR [compound annual growth rate] and its cost of capital.”