- Few Bitcoin treasury companies are expected to survive long-term market risks, according to venture firm Breed.
- The success of these companies depends on keeping their market value above their net asset value (MNAV).
- A decline in Bitcoin’s price can trigger a sequence that causes company shares to fall near their asset value and limit financing options.
- This scenario could force Bitcoin sales and company consolidations, leading to broader market downturns.
- Most companies use equity, not debt, for purchases, possibly limiting the risk of a widespread collapse.
Several Bitcoin (BTC) treasury companies may not survive future market cycles, warns a new report by venture capital company Breed. The firm says only a small group of companies will avoid entering a “death spiral” linked to falling Bitcoin prices and decreasing company valuations.
The report notes that success for these firms depends on their shares trading above the business’s net asset value, known as MNAV. This value is calculated as total assets minus total liabilities. If Bitcoin prices drop, the MNAV decreases as well, which can drive down company share prices close to their actual net asset value.
According to Breed, this process makes it more difficult for companies to secure debt or equity financing. Lower access to credit, combined with maturing debts, could result in margin calls — mandatory sales of Bitcoin holdings. This selling pressure may further depress Bitcoin’s price, allow stronger firms to acquire weaker ones, and contribute to a prolonged market slowdown. The report states: “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.”
The report outlines seven steps in the decline of a BTC treasury company, starting with a drop in Bitcoin prices and ending with possible consolidations and broader market downturns. However, the authors note that most companies currently finance purchases with equity, not debt. This means the risk of market contagion is smaller than if companies relied more heavily on loans. The analysis suggests that risk could increase if more companies begin to borrow to fund Bitcoin purchases.
Bitcoin treasury strategies rose in popularity, especially after Michael Saylor and his company, Strategy, began acquiring Bitcoin in 2020. According to BitcoinTreasuries, more than 250 organizations—including corporations, government agencies, ETFs, pension funds, and digital asset service providers—now hold Bitcoin as part of their assets.
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