Original Text | Cheshire Capital

Compiled by | Odaily Planet Daily (@OdailyChina)

Translator | Ding Dong (@XiaMiPP)

Editor's Note: In recent months, BTC treasury companies have been seen as significant drivers of the crypto market and a strong foundation supporting Bitcoin prices. However, the reality may be far less solid than imagined. When price volatility combines with shareholder pressure, even treasury companies can quickly shift from "guardians" to "sellers." This article attempts to project the market paths that BTC treasury companies may encounter in the next 6–12 months. Core assumptions:

• Subjects: 10 BTC treasury companies holding varying amounts of Bitcoin, with market net asset value multiples (mNAV) ranging from 1.0x to 5.0x.
• Differences: Company quality is determined by treasury size and management's beliefs/marketing capabilities.
• Background: The initial price of Bitcoin is $120,000.

Core Logic: Once some companies choose to sell BTC to repurchase shares, it will trigger a reflexive cycle: price drops → mNAV under pressure → more companies forced to sell → intensified selling → further price drops.

The original text is 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" here 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 repurchase shares. After all, in the short term, this can bring a net asset value enhancement effect per share. Note that these companies are selling some BTC at the price of $120,000.

Due to the aforementioned sell-off, the Bitcoin price falls back to $115,000 (this price is mainly used to illustrate the projected scenario). Some other treasury companies (including those that have already repurchased) continue to see their mNAV decline due to the highly correlated Beta effect with BTC. Thus, another 4-5 companies sell Bitcoin to repurchase shares, selling at the price of $115,000.

The market gradually realizes that among the ten companies, probably eight or nine are more concerned 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 consequences will be dire. After all, even MSTR fell to a valuation level of 0.5 times during the lows of 2022. Consequently, BTC is quickly repriced to $100,000, and most treasury companies also fall below 1.0x.

Some medium-quality treasury companies, which were still hesitating, begin to face dual pressure from the market and shareholders, being forced to maintain mNAV and thus join 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 around 1.2x. BTC falls to $90,000.

The entire treasury company system, including high-quality players, now falls below 1.0x. MSTR preferred shares drop below $0.70 against a $1 par value, and rumors even emerge that Saylor is considering suspending dividends. Some companies previously considered strong holders (like 3350, XXI) also begin to sell 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 the reflexive cycle is that the sell-off will spread up the quality chain, further amplifying scale and speed. As medium to high-quality companies also surrender completely, the largest Bitcoin holdings begin to enter the market, with weekly selling pressure reaching $1.5 billion to $3 billion.

It is important to note that, aside from MSTR, BTC treasury companies collectively hold about 350,000 Bitcoins, worth approximately $40 billion at current prices. This sell-off could last a long time, and if MSTR is also forced to participate, it would be even more brutal, with BTC potentially 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 that once sold, the company is no longer an "iterative BTC treasury" but has turned into a "one-time valuation gamble." Even selling just once will damage its reputation as a "diamond hand treasury company," significantly reducing future capital inflows.
• If one believes BTC still has a 30-40% annual compound growth rate (I believe it!), then the 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, before most of the sell-off is completed, no treasury company is worth a long-term bullish outlook.
• The moderates fare the worst. They are neither aggressive "sharks" nor do they have enough conviction. In the scenario described above, such companies (like MARA, RIOT, SMLR) will sell 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 DYNX and BTBT are included, the proportion reaches 90%). This allows them to potentially form some coordination or "collusion" to avoid the vicious cycle of competing sell-offs. Although the likelihood of maintaining such an agreement is low, the probability of success will increase with higher concentration of holdings.
• This can be compared to the banking consortium during the Archegos collapse in traditional finance. Aggressive banks (like Goldman Sachs, Deutsche Bank) were the first to liquidate, resulting in far better outcomes than those slow-moving players (Credit Suisse, Nomura) who tried to coordinate an exit.

Note: The BTC target price here is not $70,000; the prices mentioned in the text are only used to illustrate the projected scenario.

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