A new report from Bloomberg has revealed a notable decrease in corporate investments in crypto treasuries, signaling a significant transformation in this emerging trend that has rapidly affected the market over the past year.
Investments by publicly traded digital asset treasuries have significantly dropped, from 64,000 Bitcoin (BTC) in July to merely 12,600 in August, with September’s figures currently estimated at around 15,500. This decline marks a staggering 76% fall from the enthusiasm witnessed in early summer.
Crypto Treasury Firms Valuation Plummets
The wider cryptocurrency market has also encountered further issues, with Bitcoin experiencing nearly a 6% drop in the past week, aggravated by a general selloff characterized by abrupt liquidations.
Shares in certain treasuries that had previously raised funds through PIPE (Private Investment in Public Equity) arrangements have seen their valuations decline sharply, with some trading down as much as 97% below their initial issuance prices.
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One factor contributing to this shift is regulatory scrutiny, with reports suggesting that US authorities are currently investigating “unusual trading activity” in digital asset treasury shares ahead of their acquisitions.
Markus Thielen, head of 10x Research, claims that transparency regarding crypto acquisition prices of the underlying tokens and actual share counts is limited, especially since many PIPE deals involve warrants that complicate matters due to their volatility and dilution effects.
The valuations of various treasury firms, which once enjoyed significant market premiums, have drastically fallen, with their market value nearing the actual Bitcoin they hold.
This transformation is indicated by the market-cap-to-NAV (net asset value) multiple, which now reveals a concerning trend: the gap between stock prices and the value of Bitcoin reserves is closing.
Weakened Institutional Support
As corporate buyers withdraw, Bloomberg suggests that the crypto market is entering a “feedback loop” that reduces institutional support. The report claims that the lack of a stable capital source undermines demand, resulting in a more uncertain market environment.
The current scenario has led to a “two-speed market.” On one side, derivative markets are under significant stress, with demand for longer-dated futures collapsing and $275 million worth of Bitcoin longs liquidated within just 24 hours.
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On the other hand, crypto-related products continue to attract investment, as shown by the iShares Bitcoin Trust exchange-traded fund (ETF), which saw $2.5 billion in inflows in September, a significant rise from $707 million the month before.
Jeff Dorman, chief investment officer at Arca, pointed out that the current weakness in the crypto market is likely a result of reduced activity from digital asset treasuries rather than a direct cause of selling pressure. He argues that the withdrawal of these major buyers has fostered a more cautious market atmosphere.
Featured image from DALL-E, chart from TradingView.com
