- The recent crypto market downturn, which saw Bitcoin lose the $100K mark and Ethereum’s gains erased, is squeezing companies that hold large crypto treasuries.
- The crypto treasury model magnifies equity risk during drawdowns, as the coin stack loses value and the company’s stock is often de-rated simultaneously.
- Companies like BitMine and Metaplanet are facing steep unrealised losses, though Strategy (MSTR) remains in profit on its Bitcoin holdings despite a significant stock price drop.
It seems the crypto treasury fever is backfiring following the market’s recent downturn, which saw Bitcoin losing the US$100K (AU$153K) mark, and Ethereum’s gains were practically erased this year, now trading at US$3,583 (AU$5.5K).
All in all, the crypto market’s month-long slide is squeezing digital asset treasury companies that parked coins on their balance sheets. Given that the model works in uptrends, it tends to magnify equity risk during drawdowns.
In other words, those companies that hold lots of crypto as a treasury asset have been hit twice by the price decline because the coin stack loses value and the stock usually gets de-rated on top of that.
Related: Ripple Shuns IPO Rush, Raises $500M at $40B Valuation
Ether, Bitcoin DATs With Steep Losses
Ether-heavy treasuries are probably the ones under heavier pressure.
For instance, CryptoQuant pegs BitMine’s unrealised loss near US$2.1 billion (AU$3.15 billion) on roughly 3.4 million ETH. In October alone, the firm added more than 100,000 ETH, extending risk as momentum weakened.
CryptoQuant also reported that Evernorth, after weeks of buying large allocations of XRP, now carries about US$78 million (AU$117 million) in unrealised losses.
Meanwhile, Strategy (MSTR), the pioneer of the Bitcoin treasury playbook, has fallen more than 26% over the past month and is now over 50% below its record. Even so, BitcoinTreasuries estimates its average cost near US$74,000 (AU$111,000) per BTC, leaving a paper gain despite the drawdown. The company recently filed for a Euro IPO to fund more BTC purchases.
Strategy’s Japanese counterpart, Metaplanet, has around US$120M (AU$180M) in unrealised losses, and its stock is down roughly 80% from its all-time high. Back in October, the firm’s stock market value fell below the dollar value of its Bitcoin holdings.
Read more: Bitcoin Treasuries Surge: Metaplanet and Adam Back’s Future Lead Corporate Accumulation
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