The Prosperity of Digital Asset Treasuries (DAT) Companies—Driven by Strategy's Success in Bitcoin Purchases—Has Drawn Attention to Cryptocurrencies Such as Bitcoin, Ethereum, and Solana. However, Standard Chartered Bank Warned on Monday That This Attention Has Diminished as Many DATs' Market Net Asset Values (mNAV) Have Plummeted in Recent Weeks, Increasing Risks for Smaller Companies.
In the DAT space, mNAV Measures the Ratio of a Company's Enterprise Value to the Value of Its Cryptocurrency Holdings. An mNAV Above 1 Allows Companies to Issue New Shares and Continue Accumulating Digital Assets. Below This Threshold, Expanding Holdings Becomes More Difficult and Less Prudent.
Standard Chartered Noted That Several Well-Known DATs Have Recently Fallen Below This Critical Level, Effectively Cutting Off Their Ability to Continue Purchasing.
The Bank Stated, "The Recent Plunge in DAT mNAV May Drive Differentiation and Market Consolidation. Differentiation Will Favor the Largest, Lowest-Cost Financing, and Staking Yield Companies Among Peers"—A Reference to Large, Liquid Participants Such as Strategy (MSTR) and Bitmine (BMNR), as Well as Companies Able to Raise Funds Through Low-Cost Debt.
The Research Tracked Companies Including Strategy, Bitmine, Metaplanet (MTPLF), Sharplink Gaming (SBET), Upexi (UPXI), and DeFi Development Corp (DFDV), Highlighting How Their Valuations Have Been Compressed in Recent Weeks.
According to the Bank, the Suppression of mNAV Is Driven by Market Saturation, Increasing Caution Among Investors, Unsustainable Business Models, and the Rapid Expansion of Treasury Strategies for Ethereum (ETH) and Solana (SOL).
Analysts Wrote, "We Believe Market Saturation Is the Main Driver of Recent mNAV Compression," Noting That Strategy's Success in Acquiring Bitcoin (BTC) Has Spawned 89 Imitators.
If mNAV Remains Low, Standard Chartered Expects Consolidation in the Industry, with Larger Players Potentially Acquiring Weaker Competitors. For Example, the Bank Suggested That Strategy Could Maintain Its Aggressive Bitcoin Purchasing Spree by Acquiring Treasury Peers Trading at a Discount.
While Several Public Companies Have Added Cryptocurrencies to Their Balance Sheets, Digital Asset Treasury Companies Have Further Developed This Approach by Making These Holdings Central to Their Business Strategies.
In Addition to Standard Chartered, Cointelegraph Previously Highlighted the Risks of This Model, Pointing Out That Some Companies Have Abandoned Struggling Core Businesses to Repackage Themselves as Crypto Treasuries in Hopes of Riding the Coattails of the Digital Asset Boom.
Venture Capital Firm Breed Also Echoed These Concerns. In June, the Firm Warned That Only a Few Bitcoin Treasury Companies Might Escape the "Death Spiral" Triggered by Falling mNAV.
Breed's Analysts Wrote, "Ultimately, Only a Few Companies Will Be Able to Maintain a Lasting MNAV Premium. They Will Achieve This Position Through Strong Leadership, Rigorous Execution, Smart Marketing, and Unique Strategies That Continue to Grow Bitcoin Per Share Regardless of Market Fluctuations."
The New York Digital Investment Group (NYDIG) Also Emphasized the Narrowing of DAT Premiums, as the Gap Between Stock Prices and Underlying Cryptocurrency Holdings Continues to Shrink.
NYDIG's Global Research Head Greg Cipolaro Stated That Factors Contributing to the Compression Include "Investor Anxiety Over Upcoming Supply Unlocks, Changing Corporate Goals of DAT Management Teams, Substantial Increases in Stock Issuance, Investor Profit-Taking, and Limited Differentiation Between Treasury Strategies."
Other Observers Made Sharper Comparisons. Milo's CEO Josip Rupena Compared DAT Strategies to Collateralized Debt Obligations—Complex Financial Products That Helped Trigger the 2008 Financial Crisis.
Related: David Bailey: "Underperforming Altcoins" Are Confusing the Treasury Narrative
Original Article: “Standard Chartered: Digital Asset Treasuries Are Under Pressure as Market Net Asset Values (mNAV) Plummet”
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