More than 160 public companies have integrated Bitcoin as a central strategy for their treasury, pooling together almost a million BTC, which represents about 4% of the total supply in circulation. What started as an audacious strategy by one firm has evolved into a global model: raising funds, acquiring Bitcoin, and offering some equity exposure to Bitcoin via a public entity. These stocks now trade not on traditional earnings or cash flow metrics, but on their capacity to deliver Bitcoin per share. Most of these enterprises have achieved market valuations surpassing what is referred to as Net Asset Value (or “mNAV”) at multiples greater than one. The pivotal question now revolves around not whether the BTC treasury approach can be established, but what future risks and opportunities lie ahead?
The first era — from narrative to replication
The initial phase of Bitcoin treasury firms was marked by storytelling and the replication of successful models. Michael Saylor’s Strategy (formerly MicroStrategy) demonstrated that raising capital at a premium over NAV, converting those funds into BTC, and maintaining the assets without selling could morph a software company into a $100 billion proxy for Bitcoin.
From the realms of Tokyo’s Metaplanet to the US healthcare company Semler Scientific and London’s Smarter Web Company, this framework spread. However, premium valuations may not be sustainable solely on the strength of narratives and Bitcoin holdings. To survive its early stages, companies might have to substantiate NAV valuations above one through more solid foundations.
The next levers for bitcoin treasury firms
Lever One: Yield as an Edge
Similar to how REITs evolved from being mere landlords to revenue-generating entities, Bitcoin treasury firms will need to illustrate their capability to produce additional Bitcoin per share instead of passively holding their assets.
This could involve BTC-backed loans, the establishment of Lightning infrastructure, or the creation of innovative financial products aimed at monetizing balance sheet assets. For instance, securing BTC in payment channels within the Lightning network allows holders to earn fees by providing liquidity, potentially generating yields. Nonetheless, all yield strategies carry inherent risks, including credit and counterparty risks, which require careful management. Without a yield-generating mechanism, shareholder dilution could become an issue, pushing mNAV closer to one.
Lever Two: Leverage (Risk-Weighted)
The key players during the last bear market weren’t those with the most substantial balance sheets but rather those who managed their capital wisely to avoid forced sell-offs. Some BTC treasury firms are evaluating the strategic advantages of using their BTC as collateral for BTC-backed loans, which can be borrowed in USD. The USD can then be allocated for various purposes, like generating yield or acquiring additional Bitcoin. Yet, this approach requires stringent risk management along with cash flow and scenario analysis. Leveraging amplifies the reactionary benefits, but demands discipline: raise capital only at a premium, never against hard assets, and maintain sufficient timeframes to navigate market cycles.
Lever Three: Complementary Business Models
The third lever involves developing complementary business models, akin to the “picks and shovels” of the Bitcoin landscape. Some Bitcoin treasury firms are already incorporating infrastructure projects: data centers, decentralized AI computing, or Bitcoin-focused software and services.
This dual approach can elevate them beyond mere NAV arbitrage, transforming into platforms with operational cash flow. They may evolve from Bitcoin proxies into stories of equity growth. Parallels can be drawn to early dot-com era companies that grew into major tech infrastructure providers today, such as Apple, Amazon, Google, and Facebook, all sustaining considerable cash reserves.
Toward professionalization and institutionalization
The reflexive aspect of the Bitcoin treasury model is transitioning. As momentum wanes, companies are refining their Bitcoin treasury strategies: crafting resilient capital frameworks, potentially earning Bitcoin yields without diluting share exposures, and forging business lines that connect them to the larger digital asset ecosystem.
Those that excel may secure persistent premiums above NAV, institutionalize their investor bases, and become the Bitcoin-native counterparts to REITs, tech giants, or energy conglomerates. A danger exists for those remaining stagnant, possibly fading into irrelevance and trading like closed-end funds with little growth.
The next game — beyond buying bitcoin
The forthcoming phase likely doesn’t center on purchasing Bitcoin; that strategy is already established. Instead, it is about constructing the financial architecture to maintain mNAV above one through various market cycles.
The companies that successfully navigate this complexity will not just serve as proxies for Bitcoin but may establish themselves as a crucial equity component in a new monetary framework.
This article is meant for informational purposes only and represents the author’s views as of the time of writing. It does not offer financial advice, investment research, or encouragement to engage in investment activities. Mentions of Bitcoin, corporate strategies, or publicly traded companies are illustrative.
Greengage & Co. Limited is not authorized by the Financial Conduct Authority to deliver investment, crypto-trading, or regulated lending services. This content is intended for informational use, primarily targeting institutional and professional audiences, and is not aimed at retail investors.
Cryptoassets and related investments carry high risks. You risk losing all your invested money. These products are not safeguarded by the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman Service (FOS).
